2004 Instructions For Form 1040 (ALL) P 72 I1040
User Manual: P-72
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4 TLS, have you transmitted all R text files for this cycle update? I.R.S. SPECIFICATIONS TO BE REMOVED BEFORE PRINTING INSTRUCTIONS TO PRINTERS PACKAGE 1040-OTC, FOLIO 1 OF 132 MARGINS; TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD PAPER: WHITE WRITING, SUB. 20. INK: BLACK FLAT SIZE: 216mm (81⁄2 ") x 279mm (11") PERFORATE: ON FOLD DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT Date Action Date Signature O.K. to print Revised proofs requested Layer 1 Color=Solid Black Note. This booklet does not contain any tax forms. 20041040 Department of the Treasury Internal Revenue Service www.irs.gov Instructions Including Instructions for Schedules A, B, C, D, E, F, J, and SE IRS.gov Home http://www.irs.gov/ Search You surf the web, email your friends, book travel, and bank online. Why not file your tax return the same way. With Explore “Free File” and other electronic e-file options. Consider Your Taxes Done For details, see page 3 or go to www.irs.gov. IRS.gov http://www.irs.gov/ Search Health Savings Accounts (HSAs) Additional Child Tax Credit Expanded You may be able to take a deduction if contributions were made to your HSA for 2004. You may be able to take a larger additional child tax credit. Tuition and Fees Deduction Expanded Sales Tax Deduction You may be able to deduct up to $4,000 for qualified tuition and fees. You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A. For details on these and other changes, see page 11. Cat. No. 11325E Page 2 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. A Message From the Commissioner Dear Taxpayer, As our nation moves forward in this still young century, the Internal Revenue Service will focus on three areas of tax administration: • • • Improving taxpayer service; Enhancing enforcement of the tax law; and Modernizing the IRS through its people, processes, and technology. Our working equation at the IRS is simple: service plus enforcement equals compliance. Not service or enforcement, but service and enforcement. We must do both in a balanced and consistent manner, with full respect for, and attention to, taxpayer rights. By service, we mean helping people understand their federal tax obligations and facilitating their participation in the tax system. Enforcing the law is equally essential to our system of individual self-assessment. Americans need to be confident that when they pay their taxes, their neighbors and competitors are doing the same. As you prepare your taxes, I encourage you to file electronically. Last year, more than 61 million Americans did. And we expect even more to file electronically this year. E-file benefits both the taxpayer and the government. E-file promotes greater reliability and faster processing. If you’re getting a refund, you’ll get it sooner. To learn more, go online. Check out www.irs.gov and click on “1040 Central” for the tax forms, information, and updates you need. For example, you can find out whether you are eligible for the earned income credit. Also, like more than 23 million people last year, you can check the status of your refund online. Just click on “Where’s My Refund?” I hope this tax booklet is useful to you. For further information, you may contact us at www.irs.gov or call our toll-free numbers 1-800-829-1040 for individuals and 1-800-829-4933 for businesses. Sincerely, Mark W. Everson The 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. - 2 - Page 3 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. consider it done What is IRS e-file? It’s the fastest, easiest, and most convenient way to file your income tax return electronically. So easy, over 61 million taxpayers preferred e-file over filing a paper income tax return last year. Visit the IRS website at www.irs.gov/efile for all the details and latest information. What are the benefits? Free File Options! ● At least 60 percent of taxpayers are eligible to use free commercial online tax preparation software to e-file. ● Visit www.irs.gov to see if you qualify and to access these free services offered by the tax software industry (not the IRS). Fast! Easy! Convenient! ● Get your refund in half the time as paper filers do, even faster and safer with direct deposit. See page 54. ● Sign electronically and file a completely paperless return. See page 56. ● 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 15, 2005, you can schedule an electronic funds withdrawal from your checking or savings account as late as April 15, 2005. See page 55. ● 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 income tax return. ● Your bank account information is safeguarded along with other tax return information. The IRS does not have access to credit card numbers. Visit the IRS website at www.irs.gov/efile for details. How to e-file? Use an Authorized IRS e-file Provider Use a Personal Computer Many tax professionals electronically file tax returns for their clients. As a taxpayer, you have two options: ● You can prepare your return, take it to an Authorized IRS e-file Provider, and have the provider transmit it electronically to the IRS, or ● You can have a tax professional prepare your return and transmit it for you electronically. Tax professionals can charge a fee for IRS e-file. Fees can vary depending on the professional and the specific services rendered. You can file your income 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. Visit www.irs.gov for details. IRS approved tax preparation software is available for online use on the Internet, for download from the Internet, and in retail stores. Visit www.irs.gov/efile for details. If you do not qualify for the Free File options, visit our Partners Page for partners that offer other free or low-cost filing options at www.irs.gov/efile. - 3 - Page 4 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form Tax Return Page Reference Questions about what to put on a line? Help is on the page number in the circle. 1040 Label Department of the Treasury—Internal Revenue Service U.S. Individual Income Tax Return 2004 For the year Jan. 1–Dec. 31, 2004, or other tax year beginning 16 L A B E L (See instructions on page 16.) Use the IRS label. Otherwise, please print or type. H E R E Presidential Election Campaign (See page 16.) Filing Status Check only one box. Exemptions (99) IRS Use Only—Do not write or staple in this space. , 2004, ending , 20 Your first name and initial Last name OMB No. 1545-0074 Your social security number If a joint return, spouse’s first name and initial Last name Spouse’s social security number 16 FOR REFERENCE ONLY—DO NOTApt.FILE no. 16 䊱 Important! 䊱 Home address (number and street). If you have a P.O. box, see page 16. You must enter your SSN(s) above. City, town or post office, state, and ZIP code. If you have a foreign address, see page 16. 䊳 16 You Note. Checking “Yes” will not change your tax or reduce your refund. Do you, or your spouse if filing a joint return, want $3 to go to this fund? 1 Single 2 Married filing jointly (even if only one had income) 4 3 Married filing separately. Enter spouse’s SSN above and full name here. 䊳 16 䊳 Yes 5 If more than four dependents, see page 18. 18 其 child for child tax credit (see page 18) relationship to you social security number Last name 18 18 57 Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. Enclose, but do not attach, any payment. Also, please use Form 1040-V. 55 Adjusted Gross Income 7 7 Wages, salaries, tips, etc. Attach Form(s) W-2 8a Taxable interest. Attach Schedule B if required b Tax-exempt interest. Do not include on line 8a 9a Ordinary dividends. Attach Schedule B if required B-1 9a 9b 10 11 Alimony received 11 12 Business income or (loss). Attach Schedule C or C-EZ 12 Capital gain or (loss). Attach Schedule D if required. If not required, check here 䊳 13 Pensions and annuities 16a 19 19 20 20 Taxable refunds, credits, or offsets of state and local income taxes (see page 20) Other gains or (losses). Attach Form 4797 15a 18 20 8b b Qualified dividends (see page 20) IRA distributions Boxes checked on 6a and 6b No. of children on 6c who: ● lived with you ● did not live with you due to divorce or separation (see page 18) Dependents on 6c not entered above 8a 10 13 If you did not 19 14 get a W-2, 15a see page 19. 16a No Add numbers on lines above 䊳 d Total number of exemptions claimed Income Yes Head of household (with qualifying person). (See page 17.) If the qualifying person is a child but not your dependent, enter this child’s name here. 䊳 Qualifying widow(er) with dependent child (see page 17) 17 6a Yourself. If someone can claim you as a dependent, do not check box 6a 18 b Spouse (4) if qualifying (3) Dependent’s c Dependents: (2) Dependent’s (1) First name Spouse No 20 21 21 21 22 14 22 22 b Taxable amount (see page 22) 15b b Taxable amount (see page 22) 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F 18 19 Unemployment compensation 20a Social security benefits 19 24 20a 21 22 b Taxable amount (see page 24) 24 Other income. List type and amount (see page 24) Add the amounts in the far right column for lines 7 through 21. This is your total income 23 Educator expenses (see page 26) 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ 24 25 IRA deduction (see page 26) 25 26 Student loan interest deduction (see page 28) 26 27 Tuition and fees deduction (see page 29) 27 28 Health savings account deduction. Attach Form 8889 28 29 Moving expenses. Attach Form 3903 29 30 One-half of self-employment tax. Attach Schedule SE 30 31 Self-employed health insurance deduction (see page 30) 31 32 Self-employed SEP, SIMPLE, and qualified plans 32 33 Penalty on early withdrawal of savings 33 34a 35 36 34a Alimony paid b Recipient’s SSN 䊳 Add lines 23 through 34a Subtract line 35 from line 22. This is your adjusted gross income - 4 - 22 24 24 20b 21 䊳 22 26 23 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see page 75. 22 26 26 28 29 29 NEW 29 30 30 30 30 30 31 35 䊳 Cat. No. 11320B 36 31 Form 1040 (2004) Page 5 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Tax Return Page Reference Questions about what to put on a line? Help is on the page number in the circle. Form 1040 (2004) Page 37 Tax and Credits 38a Check if: 兵 其 You were born before January 2, 1940, Blind. Total boxes Blind. checked 䊳 38a Spouse was born before January 2, 1940, b If your spouse itemizes on a separate return or you were a dual-status alien, seeA-1 page 31 and check here 䊳 38b Standard Deduction for— ● People who checked any box on line 38a or 38b or who can be claimed as a dependent, see page 31. ● All others: 39 Itemized deductions (from Schedule A) or your standard deduction (see left margin) 39 Subtract line 39 from line 37 40 41 If line 37 is $107,025 or less, multiply $3,100 by the total number of exemptions claimed on line 6d. If line 37 is over $107,025, see the worksheet on page 33 41 42 Taxable income. Subtract line 41 from line 40. If line 41 is more than line 40, enter -0- 42 43 44 Tax (see page 33). Check if any tax is from: a Form(s) 8814 Alternative minimum tax (see page 35). Attach Form 6251 44 45 Add lines 43 and 44 b 䊳 48 Credit for the elderly or the disabled. Attach Schedule R 48 Married filing jointly or Qualifying widow(er), $9,700 49 Education credits. Attach Form 8863 Retirement savings contributions credit. Attach Form 8880 49 50 50 36 51 52 Child tax credit (see page 37) Adoption credit. Attach Form 8839 51 52 39 Head of household, $7,150 53 Credits from: 55 56 57 Self-employment tax. Attach Schedule SE Other Taxes Payments 37 39 39 55 䊳 56 Social security and Medicare tax on tip income not reported to employer. Attach Form 4137 58 Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required 59 60 61 62 Advance earned income credit payments from Form(s) W-2 Household employment taxes. Attach Schedule H Add lines 56 through 61. This is your total tax 60 61 䊳 2004 estimated tax payments and amount applied from 2003 return 64 If you have a 65a Earned income credit (EIC) qualifying 43 b Nontaxable combat pay election 䊳 65b NEW child, attach Schedule EIC. 66 Excess social security and tier 1 RRTA tax withheld (see page 54) 65a 67 66 41 54 54 54 68 Amount paid with request for extension to file (see page 54) 69 Other payments from: a Form 2439 b Form 4136 c Form 8885 Add lines 63, 64, 65a, and 66 through 69. These are your total payments 54 70 71 If line 70 is more than line 62, subtract line 62 from line 70. This is the amount you overpaid 54 䊳 72a Amount of line 71 you want refunded to you 71 䊳 b Routing number d Account number 䊳 73 74 75 c Type: 40 62 䊳 䊳 39 39 40 67 Additional child tax credit. Attach Form 8812 39 39 40 63 Federal income tax withheld from Forms W-2 and 1099 Amount You Owe 36 59 64 Direct deposit? See page 54 and fill in 72b, 72c, and 72d. 36 57 63 Refund 45 58 68 69 70 33 35 36 47 53 b Form 8859 a Form 8396 Other credits. Check applicable box(es): a Form 3800 54 Form 8801 c Specify b Add lines 46 through 54. These are your total credits Subtract line 55 from line 45. If line 55 is more than line 45, enter -0- 33 36 Foreign tax credit. Attach Form 1116 if required Credit for child and dependent care expenses. Attach Form 2441 54 31 43 Form 4972 47 46 31 31 40 46 Single or Married filing separately, $4,850 Checking 54 72a Savings 55 73 Amount of line 71 you want applied to your 2005 estimated tax 䊳 Amount you owe. Subtract line 70 from line 62. For details on how to pay, see page 55 Estimated tax penalty (see page 55) 75 55 䊳 54 55 74 Third Party Designee Do you want to allow another person to discuss this return with the IRS (see page 56)? Sign Here Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Joint return? See page 17. Keep a copy for your records. Paid Preparer’s Use Only 䊳 Designee’s 䊳 name Phone 䊳 no. 56 Your signature ( Yes. Complete the following. Preparer’s signature 䊳 ) Date Your occupation Date Spouse’s occupation Daytime phone number ( Date 56 Firm’s name (or yours if self-employed), address, and ZIP code 䊳 No Personal identification 䊳 number (PIN) 56 Spouse’s signature. If a joint return, both must sign. 2 37 Amount from line 36 (adjusted gross income) Check if self-employed 56 ) Preparer’s SSN or PTIN EIN Phone no. ( ) Form - 5 - 1040 (2004) Page 6 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. IRS Customer Service Standards At the IRS, our goal is to continually improve the quality of our services. To achieve that goal, we have developed customer service standards in the following areas. ● Easier filing and payment options. ● Access to information. ● Accuracy. ● ● ● ● Prompt refunds. Canceling penalties. Resolving problems. Simpler forms. If you would like information about the IRS standards and a report of our accomplishments, see Pub. 2183. Help With Unresolved Tax Issues Office of the Taxpayer Advocate Contacting Your Taxpayer Advocate Information You Should Be Prepared To Provide If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. ● Your name, address, and social security number (or employer identification number), ● Your telephone number and hours you can be reached, The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. ● The type of tax return and year(s) involved, ● A detailed description of your problem, ● Your previous attempts to solve the problem and the office you contacted, and While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. ● Description of the hardship you are facing and supporting documentation (if applicable). How To Contact Your Taxpayer Advocate Handling Your Tax Problems Your assigned personal advocate will listen to your point of view and will work with you to address your concerns. You can expect the advocate to provide you with: ● Call the Taxpayer Advocate’s toll-free number: 1-877-777-4778. ● A “fresh look” at your new or on-going problem, ● Call, write, or fax the Taxpayer Advocate office in your area (see Pub. 1546 for addresses and phone numbers). ● Timely acknowledgment, ● TTY/TDD help is available by calling 1-800-829-4059. ● The name and phone number of the individual assigned to your case, ● Visit the website at www.irs.gov/advocate. ● Updates on progress, ● Timeframes for action, ● Speedy resolution, and ● Courteous service. - 6 - Page 7 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Quick and Easy Access to Tax Help and Forms If you live outside the United States, see Pub. 54 to find out how to get help and forms. TIP • Internet Phone You can access the IRS website 24 hours a day, 7 days a week, at www.irs.gov to: You can order forms and publications and receive automated information by phone. and publications. Call 1-800-TAX-FORM (1-800-829-3676) during the hours shown on page 10 to order current year forms, instructions, and publications, and prior year forms and instructions. You should receive your order within 10 days. TeleTax topics. Call 1-800-829-4477 24 hours a day, 7 days a week, to listen to pre-recorded messages covering about 150 tax topics. See pages 8 and 9 for a list of the topics. Refund information. You can check the status of your 2004 refund 24 hours a day, 7 days a week. See page 8 for details. Forms Access commercial tax preparation and e-file services available for free to eligible taxpayers; • Check the status of your 2004 refund; • Download forms, instructions, and publications; • Order IRS products online; • Research your tax questions online; • Search publications online by topic or keyword; CD-ROM • Figure your withholding allowances using our W-4 calculator; and Order Pub. 1796, Federal Tax Products on CD-ROM, and get: • Sign up to receive local and national tax news by email. • Current year forms, instructions, and publications; Fax • Prior year forms, instructions, and publications; You can get over 100 of the most requested forms and instructions 24 hours a day, 7 days a week, by fax. Just call 703-368-9694 from the telephone connected to the fax machine. When you call, you will hear instructions on how to use the service. For help with transmission problems, call 703-487-4608. Long-distance charges may apply. • Frequently requested tax forms that can be filled in electronically, printed out for submission, and saved for recordkeeping; and • The Internal Revenue Bulletin. Buy the CD-ROM on the Internet at www.irs.gov/cdorders from the National Technical Information Service (NTIS) for $22 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the CD-ROM for $22 (plus a $5 handling fee). Other ways to get help. See page 58 for information. Mail You can order forms, instructions, and publications by completing the order blank on page 73. You should receive your order within 10 days after we receive your request. Walk-In You can pick up some of the most requested forms, instructions, and publications at many IRS offices, post offices, and libraries. Some grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of reproducible tax forms available to photocopy or print from a CD-ROM. - 7 - Page 8 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Refund Information You can check on the status of your 2004 refund if it has been at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). But if you filed Form 8379 with your return, allow 14 weeks (11 weeks if you filed electronically). Be sure to have a copy of your 2004 tax return available because you will need to know the filing status and the exact whole-dollar amount of your refund. Then, 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 on page 10. Refunds are sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. TIP Do not send in a copy of your return unless asked to do so. To get a refund, you generally must file your return within 3 years from the date the return was due (including extensions). What Is TeleTax? Recorded Tax Information Recorded tax information is available 24 hours a day, 7 days a week. Select the number of the topic you want to hear. Then, call 1-800-829-4477. Have paper and pencil handy to take notes. TeleTax Topics All topics are available in Spanish. Topic No. Subject IRS Help Available 101 102 103 104 105 IRS services — Volunteer tax assistance, toll-free telephone, walk-in assistance, and outreach programs Tax assistance for individuals with disabilities and the hearing impaired Intro. to federal taxes for small businesses/self-employed Taxpayer Advocate program — Help for problem situations Public libraries — Tax information and reproducible tax forms IRS Procedures 151 152 153 154 155 Your appeal rights Refunds — How long they should take What to do if you haven’t filed your tax return 2004 Form W-2 and Form 1099-R — What to do if not received Forms and publications — How to order Topics by Internet TeleTax topics are also available through the IRS website at www.irs.gov. Topic No. Subject 156 Copy of your tax return — How to get one 157 Change of address — How to notify IRS 158 Ensuring proper credit of payments 159 Prior year(s) Form W-2 — How to get a copy of Collection 201 202 203 204 205 251 252 253 254 255 256 The collection process What to do if you can’t pay your tax Failure to pay child support and federal nontax and state income tax obligations Offers in compromise Innocent spouse relief (and separation of liability and equitable relief) Topic No. Subject 303 Checklist of common errors when preparing your tax return 304 Extensions of time to file your tax return 305 Recordkeeping 306 Penalty for underpayment of estimated tax 307 Backup withholding 308 Amended returns 309 Roth IRA contributions 310 Coverdell education savings accounts 311 Power of attorney information 312 Disclosure authorizations 313 Qualified tuition programs (QTPs) Filing Requirements, Filing Status, and Exemptions Alternative Filing Methods 351 352 Electronic signatures Electronic filing Substitute tax forms How to choose a paid tax preparer TeleFile Filing business returns electronically 353 354 355 356 357 General Information 301 302 When, where, and how to file Highlights of tax changes - 8 - Who must file? Which form — 1040, 1040A, or 1040EZ? What is your filing status? Dependents Estimated tax Decedents Tax information for parents of kidnapped children Types of Income 401 Wages and salaries Page 9 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. TeleTax Topics (Continued) Topic No. Subject 402 Tips 403 Interest received 404 Dividends 405 Refunds of state and local taxes 406 Alimony received 407 Business income 408 Sole proprietorship 409 Capital gains and losses 410 Pensions and annuities 411 Pensions — The general rule and the simplified method 412 Lump-sum distributions 413 Rollovers from retirement plans 414 Rental income and expenses 415 Renting residential and vacation property 416 Farming and fishing income 417 Earnings for clergy 418 Unemployment compensation 419 Gambling income and expenses 420 Bartering income 421 Scholarship and fellowship grants 422 Nontaxable income 423 Social security and equivalent railroad retirement benefits 424 401(k) plans 425 Passive activities — Losses and credits 426 Other income 427 Stock options 428 Roth IRA distributions 429 Traders in securities (information for Form 1040 filers) 430 Exchange of policyholder interest for stock Adjustments to Income 451 452 453 454 455 456 457 458 Individual retirement arrangements (IRAs) Alimony paid Bad debt deduction Tax shelters Moving expenses Student loan interest deduction Tuition and fees deduction Educator expense deduction Topic No. Subject 509 Business use of home 510 Business use of car 511 Business travel expenses 512 Business entertainment expenses 513 Educational expenses 514 Employee business expenses 515 Casualty, disaster, and theft losses Tax Computation 551 552 553 554 555 556 557 558 Tax Credits 601 602 603 604 605 606 607 608 610 Should I itemize? Medical and dental expenses Deductible taxes Home mortgage points Interest expense Contributions Casualty and theft losses Miscellaneous expenses Earned income credit (EIC) Child and dependent care credit Credit for the elderly or the disabled Advance earned income credit Education credits Child tax credits Adoption credit Excess social security and RRTA tax withheld Retirement savings contributions credit Magnetic Media Filers — 1099 Series and Related Information Returns 801 802 803 804 805 851 852 853 854 651 652 653 Notices — What to do Notice of underreported income — CP 2000 IRS notices and bills, penalties, and interest charges 855 856 857 858 Basis of Assets, Depreciation, and Sale of Assets 701 703 704 705 Sale of your home Basis of assets Depreciation Installment sales 901 902 752 753 754 Social security and Medicare withholding rates Form W-2 — Where, when, and how to file Form W-4 — Employee’s Withholding Allowance Certificate Form W-5 — Advance earned income credit - 9 - Resident and nonresident aliens Dual-status alien Foreign earned income exclusion — General Foreign earned income exclusion — Who qualifies? Foreign earned income exclusion — What qualifies? Foreign tax credit Individual taxpayer identification number (ITIN) — Form W-7 Alien tax clearance Tax Information for Puerto Rico Residents (in Spanish only) Employer Tax Information 751 Who must file magnetically Applications, forms, and information Waivers and extensions Test files and combined federal and state filing Electronic filing of information returns Tax Information for Aliens and U.S. Citizens Living Abroad IRS Notices Itemized Deductions 501 502 503 504 505 506 507 508 Standard deduction Tax and credits figured by the IRS Tax on a child’s investment income Self-employment tax Ten-year tax option for lump-sum distributions Alternative minimum tax Tax on early distributions from traditional and Roth IRAs Tax on early distributions from retirement plans Topic No. Subject 755 Employer identification number (EIN) — How to apply 756 Employment taxes for household employees 757 Form 941 — Deposit requirements 758 Form 941 — Employer’s Quarterly Federal Tax Return 759 Form 940 and 940-EZ — Deposit requirements 760 Form 940 and Form 940-EZ — Employer’s Annual Federal Unemployment Tax Returns 761 Tips — Withholding and reporting 762 Independent contractor vs. employee 903 904 Who must file a U.S. income tax return in Puerto Rico Deductions and credits for Puerto Rico filers Federal employment taxes in Puerto Rico Tax assistance for Puerto Rico residents Topic numbers are effective January 1, 2005. Page 10 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Calling the IRS If you cannot find the answer to your question using one of the methods listed on page 7, please call us for assistance at 1-800-829-1040. You will not be charged for the call unless your phone company charges you for toll-free calls. Our normal hours of operation are Monday through Friday from 7:00 a.m. to 10:00 p.m. local time. Beginning January 29, 2005, through April 9, 2005, assistance will also be available on Saturday from 10:00 a.m. to 3:00 p.m. local time. Assistance provided to callers from Alaska and Hawaii will be based on the hours of operation in the Pacific time zone. TIP Before You Call IRS representatives care about the quality of the service provided to you, our customer. You can help us provide accurate, complete answers to your questions by having the following information available. • The tax form, schedule, or notice to which your question relates. • The facts about your particular situation. The answer to the same question often varies from one taxpayer to another because of differences in their age, income, whether they can be claimed as a dependent, etc. • The name of any IRS publication or other source of information that you used to look for the answer. To maintain your account security, you may be asked for the following information, which you should also have available. • Your social security number. • The amount of refund and filing status shown on your tax return. • The “Caller ID Number” shown at the top of any notice you received. • Your personal identification number (PIN) if you have one. • Your date of birth. • The numbers in your street address. • Your ZIP code. If you want to check the status of your 2004 refund, see Refund Information on page 8. If you are asking for an installment agreement to pay your tax, you will be asked for the highest amount you can pay each month and the date on which you can pay it. Evaluation of services provided. The IRS uses several methods to evaluate our telephone service. One method is to record telephone calls for quality purposes only. A random sample of recorded calls is selected for review through the quality assurance process. Other methods include listening to live calls in progress and random selection of customers for participation in a customer satisfaction survey. • Order tax forms and publications. • Find out what you owe. • Determine if we have adjusted your account or received payments you made. • Request a transcript of your tax return or account. • Find out where to send your tax return or payment. • Request more time to pay or set up a monthly installment agreement. • Find out if you qualify for innocent spouse relief. Before You Hang Up Making the Call Call 1-800-829-1040 (for TTY/TDD help, call 1-800-829-4059). Our menus allow callers with pulse or rotary dial telephones to speak their responses when requested to do so. First, you will be provided a series of options that will request touch-tone responses. If a touch-tone response is not received, you will then hear a series of options and be asked to speak your selections. After your touch-tone or spoken response is received, the system will direct your call to the appropriate assistance. You can do the following within the system. - 10 - If you do not fully understand the answer you receive, or you feel our representative may not fully understand your question, our representative needs to know this. He or she will be happy to take additional time to be sure your question is answered fully. By law, you are responsible for paying your share of federal income tax. If we should make an error in answering your question, you are still responsible for the payment of the correct tax. Should this occur, however, you will not be charged any penalty. Page 11 of 79 of Instructions 1040 15:14 - 10-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Before You Fill In Form 1040 TIP For details on these and other changes for 2004 and 2005, see Pub. 553. What’s New for 2004 Health savings account (HSA) deduction. You may be able to take a deduction if contributions (other than employer contributions) were made to your HSA for 2004. See Form 8889 for details. Tuition and fees deduction expanded. You may be able to deduct up to $4,000 if your adjusted gross income (AGI) is not more than $65,000 ($130,000 if married filing jointly), or deduct up to $2,000 if your AGI is higher than that limit but not more than $80,000 ($160,000 if married filing jointly). See the instructions for line 27 on page 29. Sales tax deduction. You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A. Generally, you can use either your actual expenses or the Optional State Sales Tax Tables to figure your state and local general sales tax deduction. See the Instructions for Schedule A for details. Income averaging for farmers and fishermen. Fishermen can elect to use income averaging on Schedule J to reduce their tax. Also, the benefit of income averaging is extended to farmers and fishermen who owe the alternative minimum tax. See the Instructions for Schedule J for details. Unlawful discrimination claims. You may be able to take a deduction on line 35 for attorney fees and court costs paid after October 22, 2004, for actions settled or decided after that date involving a claim of unlawful discrimination, a claim against the United States Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act, but only up to the amount included in gross income in 2004 from such claim. See Pub. 525 for details. Tax Computation Worksheet. If your taxable income is $100,000 or more, you will now use the Tax Computation Worksheet instead of the Tax Rate Schedules to figure See How To Avoid Common Mistakes on page 57. If you were serving in, or in support of, the U.S. Armed Forces in a designated combat zone, qualified hazardous duty area, or contingency operation (for example, you were in the Afghanistan, Bosnia, Kosovo, or Persian Gulf area), see Pub. 3. your tax. The Tax Computation Worksheet is on page 72. The Tax Rate Schedules are shown on page 76 so you can see the tax rate that applies to all levels of taxable income, but they should not be used to figure your tax. IRA deduction allowed to more people covered by retirement plans. You may be able to take an IRA deduction if you were covered by a retirement plan and your modified AGI is less than $55,000 ($75,000 if married filing jointly or qualifying widow(er)). See the instructions for line 25 that begin on page 26. Certain business expenses of reservists, performing artists, and fee-basis government officials. These expenses are now reported on line 24. See the instructions for line 24 on page 26. Earned income credit (EIC). You may be able to take the EIC if: • A child lived with you and you earned less than $34,458 ($35,458 if married filing jointly), or • A child did not live with you and you earned less than $11,490 ($12,490 if married filing jointly). If you were a member of the U.S. Armed Forces who served in a combat zone, you may be able to include your nontaxable combat pay in earned income when figuring the EIC. See the instructions for lines 65a and 65b that begin on page 41. Additional child tax credit expanded. The credit limit based on earned income is increased to 15% of your earned income that exceeds $10,750. If you were a member of the U.S. Armed Forces who served in a combat zone, your nontaxable combat pay counts as earned income when figuring this credit limit. See Form 8812 for details. Standard mileage rates. The 2004 rate for business use of your vehicle is 371⁄2 cents a mile. The 2004 rate for use of your vehicle to get medical care or to move is 14 cents a mile. Qualified tuition program (QTP) distributions. You may be able to exclude from income distributions from a private QTP if the distributions are not more than - 11 - your qualified higher education expenses. See Pub. 970. Elective salary deferrals. The maximum amount you can defer under all plans is generally limited to $13,000 ($16,000 for section 403(b) plans if you qualify for the 15-year rule). The catch-up contribution limit increased to $3,000 ($1,500 for SIMPLE plans). See the instructions for line 7 on page 19. Excise tax on insider stock compensation from an expatriated corporation. You may owe a 15% excise tax on the value of nonstatutory stock options and certain other stock-based compensation held by you or a member of your family from an expatriated corporation or its expanded affiliated group in which you were an officer, director, or more-than-10% owner. See the instructions for line 62 on page 40. 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 You File? on the back cover. What’s New for 2005 IRA deduction expanded. You, and your spouse if filing jointly, may be able to deduct up to $4,000 ($4,500 if age 50 or older at the end of 2005). If you were covered by a retirement plan, you may be able to take an IRA deduction if your 2005 modified AGI is less than $60,000 ($80,000 if married filing jointly or qualifying widow(er)). EIC phaseout amount increased for joint filers. The maximum amount of earned income that joint filers can have and still take the EIC will be $2,000 more than that for other filers. Elective salary deferrals. The maximum amount you can defer under all plans is generally limited to $14,000 ($17,000 for section 403(b) plans if you qualify for the 15-year rule). The catch-up contribution limit is increased to $4,000 ($2,000 for SIMPLE plans). Page 12 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Filing Requirements Do You Have To File? Use Chart A, B, or C to see if you must file a return. U.S. citizens who lived in or had income from a U.S. possession should see Pub. 570. Residents of Puerto Rico can use TeleTax topic 901 (see page 8) to see if they must file. Even if you do not otherwise have to file a return, you should file one to get a refund of any federal income tax withheld. You should also file if you are eligible for the earned income credit, the additional child tax credit, or the health coverage tax credit. TIP Have you tried IRS e-file? It’s the fastest way to get your refund and it’s free if you are eligible. Visit www.irs.gov for details. Exception for children under age 14. If you are planning to file a tax return for your child who was under age 14 at the end of 2004 and certain other conditions apply, you can elect to include your child’s income on your return. But you must use Form 8814 to do so. If you make this election, your child does not have to file a return. For details, use TeleTax topic 553 (see page 8) or see Form 8814. These rules apply to all U.S. citizens, regardless of where they live, and resident aliens. Nonresident aliens and dual-status aliens. These rules also apply to nonresident aliens and dual-status aliens who were married to U.S. citizens or residents at the end of 2004 and who have elected to be taxed as resident aliens. Other nonresident aliens and dual-status aliens have different filing requirements. They may have to file Form 1040NR or Form 1040NR-EZ. Specific rules apply to determine if you are a resident or nonresident alien. See Pub. 519 for details, including the rules for students and scholars who are aliens. When Should You File? Not later than April 15, 2005. If you file after this date, you may have to pay interest and penalties. See page 59. What If You Cannot File on Time? You can get an automatic 4-month extension if, no later than April 15, 2005, you either file for an extension by phone or you file Form 4868. For details, including how to file by phone, see Form 4868. ! CAUTION An automatic 4-month extension to file does not extend the time to pay your tax. See Form 4868. If you are a U.S. citizen or resident, you may qualify for an automatic extension of time to file without filing Form 4868 or filing for an extension by phone. You qualify if, on the due date of your return, you meet one of the following conditions. • You live 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. • You are in military or naval service on duty outside the United States and Puerto Rico. This extension gives you an extra 2 months to file and pay the tax, but interest will be charged from the original due date of the return on any unpaid tax. You must attach a statement to your return showing that you meet the requirements. Where Do You File? See the back cover of this booklet for filing instructions and addresses. For details on using a private delivery service to mail your return or payment, see page 15. A child born on January 1, 1991, is considered to be age 14 at the end of 2004. Do not use Form 8814 for such a child. Chart A—For Most People IF your filing status is . . . AND at the end of 2004 you were* . . . THEN file a return if your gross income** was at least . . . Single under 65 65 or older $7,950 9,150 Married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses) Married filing separately (see page 17) any age Head of household (see page 17) under 65 65 or older $10,250 11,450 Qualifying widow(er) with dependent child (see page 17) under 65 65 or older $12,800 13,750 $15,900 16,850 17,800 $3,100 * If you were born on January 1, 1940, you are considered to be age 65 at the end of 2004. ** 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 in 2004. *** If you did not live with your spouse at the end of 2004 (or on the date your spouse died) and your gross income was at least $3,100, you must file a return regardless of your age. - 12 - Page 13 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Chart B—For Children and Other Dependents (See the instructions for line 6c on page 18 to find out if someone can claim you as a dependent.) 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. Earned income includes wages, tips, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income. ! CAUTION If your gross income was $3,100 or more, you usually cannot be claimed as a dependent unless you were (a) under age 19 at the end of 2004 or (b) under age 24 at the end of 2004 and a student. For details, see Pub. 501. 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 $800. • Your earned income was over $4,850. • Your gross income was more than the larger of — • $800, or • Your earned income (up to $4,600) plus $250. Yes. You must file a return if any of the following apply. • Your unearned income was over $2,000 ($3,200 if 65 or older and blind). • Your earned income was over $6,050 ($7,250 if 65 or older and blind). • Your gross income was more than — The larger of: Plus • $800, or • Your earned income (up to $4,600) plus $250 } This amount: $1,200 ($2,400 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 $800. • Your earned income was over $4,850. • 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 $4,600) plus $250. Yes. You must file a return if any of the following apply. • Your unearned income was over $1,750 ($2,700 if 65 or older and blind). • Your earned income was over $5,800 ($6,750 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: Plus This amount: • $800, or • Your earned income (up to $4,600) plus $250 } $950 ($1,900 if 65 or older and blind) Chart C—Other Situations When You Must File You must file a return if any of the four conditions below apply for 2004. 1. You owe any special taxes, such as: Social security and Medicare tax on tips you did not report to your employer, Uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group-term life insurance, Alternative minimum tax, Recapture taxes (see the instructions for line 43, on page 33, and line 62, on page 40), or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. • • • • • 2. You received any advance earned income credit (EIC) payments from your employer. These payments are shown in Form W-2, box 9. 3. You had net earnings from self-employment of at least $400. 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. - 13 - Page 14 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Where To Report Certain Items From 2004 Forms W-2, 1098, and 1099 IRS e-file takes the guesswork out of preparing your return. You may also be eligible to use free online commercial tax preparation software to file your federal income tax return. Visit www.irs.gov/efile for details. If any federal income tax withheld is shown on these forms, include the tax withheld on Form 1040, line 63. If you itemize your deductions and any state or local income tax withheld is shown on these forms, include the tax withheld on Schedule A, line 5, if you do not elect to deduct state and local general sales taxes. Form Item and Box in Which it Should Appear Where To Report if Filing Form 1040 W-2 Wages, tips, other compensation (box 1) Allocated tips (box 8) Advance EIC payment (box 9) Dependent care benefits (box 10) Adoption benefits (box 12, code T) Employer contributions to an Archer MSA (box 12, code R) Employer contributions to a health savings account (box 12, code W) Form 1040, line 7 See Tip income on page 19 Form 1040, line 60 Form 2441, line 12 Form 8839, line 22 Form 8853, line 3 W-2G Gambling winnings (box 1) Form 1040, line 21 (Schedule C or C-EZ for professional gamblers) 1098 Mortgage interest (box 1) Points (box 2) Refund of overpaid interest (box 3) Form 1040, line 21, but first see the instructions on Form 1098* 1098-E Student loan interest (box 1) See the instructions for Form 1040, line 26, on page 28* 1098-T Qualified tuition and related expenses (box 1) See the instructions for Form 1040, line 27, on page 29, or line 49, on page 36, but first see the instructions on Form 1098-T* 1099-A Acquisition or abandonment of secured property See Pub. 544 1099-B Stocks, bonds, etc. (box 2) Bartering (box 3) Aggregate profit or (loss) (box 11) See the instructions on Form 1099-B See Pub. 525 Form 6781, line 1 1099-C Canceled debt (box 2) Form 1040, line 21, but first see the instructions on Form 1099-C* 1099-DIV Total ordinary dividends (box 1a) Qualified dividends (box 1b) Total capital gain distributions (box 2a) Unrecaptured section 1250 gain (box 2b) Form 1040, line 9a See the instructions for Form 1040, line 9b, on page 20 Form 1040, line 13, or, if required, Schedule D, line 13 See the instructions for Schedule D, line 19, that begin on page D-7 See Exclusion of Gain on Qualified Small Business (QSB) Stock in the instructions for Schedule D on page D-4 See the instructions for Schedule D, line 18, on page D-7 See the instructions for Form 1040, line 9a, on page 20 Schedule A, line 22 Form 1040, line 46, or Schedule A, line 8 } Section 1202 gain (box 2c) Collectibles (28%) gain (box 2d) Nontaxable (nondividend) distributions (box 3) Investment expenses (box 5) Foreign tax paid (box 6) 1099-G 1099-H Unemployment compensation (box 1) Form 8889, line 9 Schedule A, line 10* State or local income tax refunds, credits, or offsets (box 2) Taxable grants (box 6) Agriculture payments (box 7) Form 1040, line 19. But if you repaid any unemployment compensation in 2004, see the instructions for line 19 on page 24. See the instructions for Form 1040, line 10, that begin on page 20* Form 1040, line 21* See the Instructions for Schedule F or Pub. 225* HCTC advance payments (box 1) Form 8885, lines 2 and 6 * If the item relates to an activity for which you are required to file Schedule C, C-EZ, E, or F or Form 4835, report the taxable or deductible amount allocable to the activity on that schedule or form instead. - 14 - Page 15 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form Item and Box in Which it Should Appear Where To Report if Filing Form 1040 1099-INT Interest income (box 1) Early withdrawal penalty (box 2) Interest on U.S. savings bonds and Treasury obligations (box 3) Investment expenses (box 5) Foreign tax paid (box 6) See the instructions for Form 1040, line 8a, on page 19 Form 1040, line 33 See the instructions for Form 1040, line 8a, on page 19 1099-LTC Long-term care and accelerated death benefits See Pub. 502 and the Instructions for Form 8853 1099-MISC Rents (box 1) Royalties (box 2) See the Instructions for Schedule E* Schedule E, line 4 (timber, coal, iron ore royalties, see Pub. 544)* Form 1040, line 21* Schedule C, C-EZ, or F. But if you were not self-employed, see the instructions on Form 1099-MISC. See the instructions on Form 1099-MISC Other income (box 3) Nonemployee compensation (box 7) Other (boxes 5, 6, 8, 9, 10, 13, and 14) 1099-OID Schedule A, line 22 Form 1040, line 46, or Schedule A, line 8 Original issue discount (box 1) Other periodic interest (box 2) Early withdrawal penalty (box 3) Original issue discount on U.S. Treasury obligations (box 6) Investment expenses (box 7) Form 1040, line 33 See the instructions on Form 1099-OID 1099-PATR Patronage dividends and other distributions from a cooperative (boxes 1, 2, 3, and 5) Credits (boxes 6, 7, and 8) Patron’s AMT adjustment (box 9) Schedule C, C-EZ, or F or Form 4835, but first see the instructions on Form 1099-PATR Form 3468, 5884, 8844, 8845, 8861, or 8884 Form 6251, line 26 1099-Q Qualified education program payments See the instructions for Form 1040, line 21, on page 24 1099-R Distributions from IRAs** Distributions from pensions, annuities, etc. See the instructions for Form 1040, lines 15a and 15b, on page 22 See the instructions for Form 1040, lines 16a and 16b, that begin on page 22 See the instructions on Form 1099-R } Capital gain (box 3) 1099-S Gross proceeds from real estate transactions (box 2) Buyer’s part of real estate tax (box 5) 1099-SA Distributions from health savings accounts (HSAs) Distributions from MSAs*** See the instructions on Form 1099-OID Schedule A, line 22 Form 4797, Form 6252, or Schedule D. But if the property was your home, see the Instructions for Schedule D to find out if you must report the sale or exchange. See the instructions for Schedule A, line 6, on page A-3* Form 8889, line 12a Form 8853 * If the item relates to an activity for which you are required to file Schedule C, C-EZ, E, or F or Form 4835, report the taxable or deductible amount allocable to the activity on that schedule or form instead. ** This includes distributions from Roth, SEP, and SIMPLE IRAs. *** This includes distributions from Archer and Medicare Advantage MSAs. Private Delivery Services You can use certain private delivery services designated by the IRS to meet the ‘‘timely mailing as timely filing/paying’’ rule for tax returns and payments. These private delivery services include only the following. • 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. - 15 - The private delivery service can tell you how to get written proof of the mailing date. Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal CAUTION Service to mail any item to an IRS P.O. box address. ! Page 16 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 1 Line Instructions for Form 1040 Name and Address Use the Peel-Off Label Using your peel-off name and address label on the back of this booklet will speed the processing of your return. It also prevents common errors that can delay refunds or result in unnecessary notices. Put the label on your return after you have finished it. Cross out any incorrect information and print the correct information. Add any missing items, such as your apartment number. Address Change If the address on your peel-off label is not your current address, cross out your old address and print your new address. If you plan to move after filing your return, use Form 8822 to notify the IRS of your new address. Name Change If you changed your name because of marriage, divorce, etc., be sure to report the change to your local Social Security Administration office before filing your return. This prevents delays in processing your return and issuing refunds. It also safeguards your future social security benefits. See page 58 for more details. If you received a peel-off label, cross out your former name and print your new name. What if You Do Not Have a Label? Print or type the information in the spaces provided. If you are married filing a separate return, enter your husband’s or wife’s name on line 3 instead of below your name. If you filed a joint return for 2003 and you are filing a joint TIP return for 2004 with the same spouse, be sure to enter your names and SSNs in the same order as on your 2003 return. P.O. Box Enter your box number only if your post office does not deliver mail to your home. IRS e-file takes the guesswork out of preparing your return. You may also be eligible to use free online commercial tax preparation software to file your federal income tax return. Visit www.irs.gov/efile for details. Foreign Address Enter the information in the following order: City, province or state, and country. Follow the country’s practice for entering the postal code. Do not abbreviate the country name. Death of a Taxpayer See page 58. Social Security Number (SSN) An incorrect or missing SSN may increase your tax or reduce your refund. To apply for an SSN, fill in Form SS-5 and return it to the Social Security Administration (SSA). You can get Form SS-5 online at www.socialsecurity.gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. It usually takes about 2 weeks to get an SSN. Check that your SSN on your Forms W-2 and 1099 agrees with your social security card. If not, see page 58 for more details. IRS Individual Taxpayer Identification Numbers (ITINs) for Aliens If you are a nonresident or resident alien and you do not have and are not eligible to get an SSN, you must apply for an ITIN. For details on how to do so, see Form W-7 and its instructions. It usually takes about 4-6 weeks to get an ITIN. If you already have an ITIN, enter it wherever your SSN is requested on your tax return. Note. An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U.S. law. 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. Need more information or forms? See page 7. - 16 - 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 “Yes” box. If you are filing a joint return, your spouse may also have $3 go to the fund. If you check “Yes,” your tax or refund will not change. Filing Status Check only the filing status that applies to you. The ones that will usually give you the lowest tax are listed last. • Married filing separately. • Single. • Head of household. • Married filing jointly or qualifying widow(er) with dependent child. TIP More than one filing status can apply to you. Choose the one that will give you the lowest tax. Line 1 Single You can check the box on line 1 if any of the following was true on December 31, 2004. • You were never married. • You were legally separated, according to your state law, under a decree of divorce or separate maintenance. • You were widowed before January 1, 2004, and did not remarry in 2004. But if you have a dependent child, you may be able to use the qualifying widow(er) filing status. See the instructions for line 5 on page 17. Page 17 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 2 Through 5 Line 2 Married Filing Jointly You can check the box on line 2 if any of the following apply. • You were married as of December 31, 2004, even if you did not live with your spouse at the end of 2004. • Your spouse died in 2004 and you did not remarry in 2004. • You were married as of December 31, 2004, and your spouse died in 2005 before filing a 2004 return. A husband and wife can file a joint return even if only one had income or if they did not live together all year. However, both persons must sign the return. If you file a joint return for 2004, you cannot, after the due date for filing that return, amend it to file as married filing separately. Joint and several tax liability. If you file a joint return, both you and your spouse are generally responsible for the tax and any interest or penalties due on the return. This means that if one spouse does not pay the tax due, the other may have to. However, see Innocent Spouse Relief on page 57. Nonresident aliens and dual-status aliens. You may be able to file a joint return. See Pub. 519 for details. Line 3 Married Filing Separately If you are married and file a separate return, you will usually pay more tax than if you use another filing status that you qualify for. Also, if you file a separate return, you cannot take the student loan interest deduction, the tuition and fees deduction, the education credits, or the earned income credit. You also cannot take the standard deduction if your spouse itemizes deductions. Generally, you report only your own income, exemptions, deductions, and credits. Different rules apply to people in community property states. See page 19. You may be able to file as head of household if you had a child TIP living with you and you lived apart from your spouse during the last 6 months of 2004. See Married persons who live apart on this page. Line 4 Head of Household This filing status is for unmarried individuals who provide a home for certain other persons. (Some married persons who live apart may also qualify. See this page.) You can check the box on line 4 only if as of December 31, 2004, you were unmarried or legally separated (according to your state law) under a decree of divorce or separate maintenance and either 1 or 2 below applies to you. 1. You paid over half the cost of keeping up a home that was the main home for all of 2004 of your parent whom you can claim as a dependent. Your parent did not have to live with you in your home. 2. You paid over half the cost of keeping up a home in which you lived and in which one of the following also lived for more than half of the year (if half or less, see the Exception on this page). a. Your unmarried child, adopted child, grandchild, great-grandchild, etc., or stepchild. It does not matter what age the child was. This child does not have to be your dependent. If the child is not your dependent, enter the child’s name in the space provided on line 4. If you do not enter the name, it will take us longer to process your return. b. Your married child, adopted child, grandchild, great-grandchild, etc., or stepchild. This child must be your dependent. But if your married child’s other parent claims him or her as a dependent under the rules for Children Who Did Not Live With You Due to Divorce or Separation on page 18, this child does not have to be your dependent. In this case, enter the child’s name on line 4. If you do not enter the name, it will take us longer to process your return. c. Your foster child, who must be your dependent. d. Any other relative you can claim as a dependent. For the definition of a relative, see Pub. 501. You cannot file as head of household if your child, parent, or relative described above is CAUTION your dependent under the rules on Multiple Support Agreement in Pub. 501. ! Married persons who live apart. Even if you were not divorced or legally separated in 2004, you may be able to file as head of household. You can check the box on line 4 if all of the following apply. • You must have lived apart from your spouse for the last 6 months of 2004. Temporary absences for special circumstances, such as for business, medical care, school, or military service, count as time lived in the home. • You file a separate return from your spouse. • You paid over half the cost of keeping up your home for 2004. • Your home was the main home of your child, adopted child, stepchild, or fos- - 17 - ter child for more than half of 2004 (if half or less, see the Exception below). • You claim this child as your dependent or the child’s other parent claims him or her under the rules for Children Who Did Not Live With You Due to Divorce or Separation on page 18. If this child is not your dependent, be sure to enter the child’s name on line 4. If you do not enter the name, it will take us longer to process your return. Keeping up a home. To find out what is included in the cost of keeping up a home, see Pub. 501. If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. However, you must include them in the total cost of keeping up your home to figure if you paid over half of the cost. Dependent. To find out if someone is your dependent, see the instructions for line 6c on page 18. Exception. You can count temporary ab- sences for special circumstances, such as for school, vacation, medical care, or military service, as time lived in the home. If the person for whom you kept up a home was born or died in 2004, you may still file as head of household as long as the home was that person’s main home for the part of the year he or she was alive. Line 5 Qualifying Widow(er) With Dependent Child You can check the box on line 5 and use joint return tax rates for 2004 if all of the following apply. • Your spouse died in 2002 or 2003 and you did not remarry in 2004. • You have a child, adopted child, stepchild, or foster child whom you claim as a dependent. • This child lived in your home for all of 2004. Temporary absences for special circumstances, such as for school, vacation, medical care, or military service, count as time lived in the home. • You paid over half the cost of keeping up your home. • You could have filed a joint return with your spouse the year he or she died, even if you did not actually do so. If your spouse died in 2004, you cannot file as qualifying widow(er) with dependent child. Instead, see the instructions for line 2 on this page. Need more information or forms? See page 7. Page 18 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 6b and 6c Exemptions You usually can deduct $3,100 on line 41 for each exemption you can take. Line 6b Support test. You must have provided over half of the person’s total support in 2004. But there are two exceptions to this test: One for children of divorced or separated parents and one for persons supported by two or more taxpayers. TIP Spouse Check the box on line 6b if either of the following apply. 1. Your filing status is married filing jointly. 2. You were married as of December 31, 2004, your filing status is married filing separately or head of household, and both of the following apply. a. Your spouse had no income and is not filing a return. b. Your spouse cannot be claimed as a dependent on another person’s return. If your filing status is head of household and you check the box on line 6b, enter the name of your spouse on the dotted line next to line 6b. Also, enter your spouse’s social security number in the space provided at the top of your return. Line 6c Dependents You can take an exemption for each of your dependents. The following is a brief description of the five tests that must be met for a person to qualify as your dependent. If you have more than four dependents, attach a statement to your return with the required information. Relationship test. The person must be either your relative or have lived in your home all year as a member of your household. If the person is not your relative, the relationship must not violate local law. Joint return test. If the person is married, he or she cannot file a joint return. But the person can file a joint return if the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns. Citizen or resident test. The person must be a U.S. citizen or resident alien, or a resident of Canada or Mexico. There is an exception for certain adopted children. To find out who is a resident alien, use TeleTax topic 851 (see page 8) or see Pub. 519. Income test. The person’s gross income must be less than $3,100. But your child’s gross income can be $3,100 or more if he or she was either (a) under age 19 at the end of 2004, or (b) under age 24 at the end of 2004 and a student. For more details about the tests, including any exceptions that apply, see Pub. 501. Line 6c, Column (2) You must enter each dependent’s social security number (SSN). Be sure the name and SSN entered agree with the dependent’s social security card. Otherwise, at the time we process your return, we may disallow the exemption claimed for the dependent and reduce or disallow any other tax benefits (such as the child tax credit) based on that dependent. If the name or SSN on the dependent’s social security card is not correct, call the Social Security Administration at 1-800-772-1213. For details on how your dependent can get an SSN, see page TIP 16. If your dependent will not have a number by April 15, 2005, see What If You Cannot File on Time? on page 12. If your dependent child was born and died in 2004 and you do not have an SSN for the child, you can attach a copy of the child’s birth certificate instead and enter “Died” in column (2). Adoption taxpayer identification numbers (ATINs). If you have a dependent who was placed with you by an authorized placement agency and you do not know his or her SSN, you must get an ATIN for the dependent from the IRS. An authorized placement agency includes any person authorized by state law to place children for legal adoption. See Form W-7A for details. Line 6c, Column (4) Check the box in this column if your dependent is a qualifying child for the child tax credit (defined below). If you have a qualifying child, you may be able to take the child tax credit on line 51 and the additional child tax credit on line 67. A qualifying child for purposes of the child tax credit is a child who: Qualifying child for child tax credit. 1. Is claimed as your dependent on line 6c, 2. Was under age 17 at the end of 2004, 3. Is your (a) son, daughter, adopted child, stepchild, or a descendant of any of them (for example, your grandchild); (b) brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew), whom you cared for as you would your own child; or (c) foster child (any child placed with you by an au- Need more information or forms? See page 7. - 18 - thorized placement agency whom you cared for as you would your own child), and 4. Is a U.S. citizen or resident alien. The above requirements are not the same as the requirements to be a qualifying child for the CAUTION earned income credit. An adopted child is always treated as your own child. An adopted child includes a child placed with you by an authorized placement agency for legal adoption even if the adoption is not final. An authorized placement agency includes any person or court authorized by state law to place children for legal adoption. ! Children Who Did Not Live With You Due to Divorce or Separation If you are claiming a child who did not live with you under the rules explained in Pub. 501 for children of divorced or separated parents, attach Form 8332 or similar statement to your return. But see the Exception below. If your divorce decree or separation agreement went into effect after 1984, you can attach certain pages from the decree or agreement instead of Form 8332. To be able to do this, the decree or agreement must state all three of the following. 1. You can claim the child as your dependent without regard to any condition (such as payment of support). 2. The other parent will not claim the child as a dependent. 3. The years for which the claim is released. Attach all of the following pages from the decree or agreement. • Cover page (include the other parent’s SSN on that page). • The pages that include all of the information identified in (1) through (3) above. • Signature page with the other parent’s signature and date of agreement. ! CAUTION You must attach the required information even if you filed it with your return in an earlier year. Exception. You do not have to attach Form 8332 or similar statement if your divorce decree or written separation agreement went into effect before 1985 and it states that you can claim the child as your dependent. Other Dependent Children Include the total number of children who did not live with you for reasons other than divorce or separation on the line labeled ‘‘Dependents on 6c not entered above.’’ Include dependent children who lived in Canada or Mexico during 2004. Page 19 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 7 and 8a Income Foreign-Source Income You must report unearned income, such as interest, dividends, and pensions, from sources outside the United States unless exempt by law or a tax treaty. You must also report earned income, such as wages and tips, from sources outside the United States. If you worked abroad, you may be able to exclude part or all of your earned income. For details, see Pub. 54 and Form 2555 or 2555-EZ. Foreign retirement plans. If you were a beneficiary of a foreign retirement plan, you may have to report the undistributed income earned in your plan. However, if you were the beneficiary of a Canadian registered retirement plan, see Form 8891 to find out if you can elect to defer tax on the undistributed income. Report distributions from foreign pension plans on lines 16a and 16b. Community Property States Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. If you and your spouse lived in a community property state, you must usually follow state law to determine what is community income and what is separate income. For details, see Pub. 555. Rounding Off to Whole 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. Line 7 Wages, Salaries, Tips, etc. Enter the total of your wages, salaries, tips, etc. If a joint return, also include your spouse’s income. For most people, the amount to enter on this line should be shown in Form(s) W-2, box 1. But the following types of income must also be included in the total on line 7. • Wages received as a household employee for which you did not receive a Form W-2 because your employer paid you less than $1,400 in 2004. Also, enter ‘‘HSH’’ and the amount not reported on Form W-2 on the dotted line next to line 7. • Tip income you did not report to your employer. Also include allocated tips shown on your Form(s) W-2 unless you can prove that you received less. Allocated tips should be shown in Form(s) W-2, box 8. They are not included as income in box 1. See Pub. 531 for more details. ! CAUTION You may owe social security and Medicare tax on unreported or allocated tips. See the instructions for line 58 on page 39. • Dependent care benefits, which should be shown in Form(s) W-2, box 10. But first complete Form 2441 to see if you may exclude part or all of the benefits. • Employer-provided adoption benefits, which should be shown in Form(s) W-2, box 12, with code T. But see the Instructions for Form 8839 to find out if you can exclude part or all of the benefits. You may also be able to exclude amounts if you adopted a child with special needs and the adoption became final in 2004. • Scholarship and fellowship grants not reported on Form W-2. Also, enter “SCH” and the amount on the dotted line next to line 7. However, if you were a degree candidate, include on line 7 only the amounts you used for expenses other than tuition and course-related expenses. For example, amounts used for room, board, and travel must be reported on line 7. • Excess salary deferrals. The amount deferred should be shown in Form W-2, box 12, and the “Retirement plan” box in box 13 should be checked. If the total amount you (or your spouse if filing jointly) deferred for 2004 under all plans was more than $13,000 (excluding catch-up contributions as explained below), include the excess on line 7. This limit is increased to $16,000 for section 403(b) plans if you qualify for the 15-year rule in Pub. 571. A higher limit may apply to participants in section 457(b) deferred compensation plans for the 3 years before retirement age. Contact your plan administrator for more information. If you were age 50 or older at the end of 2004, your employer may have allowed an additional deferral (catch-up contributions) of up to $3,000 ($1,500 for SIMPLE plans). This additional deferral amount is not subject to the overall limit on elective deferrals. ! CAUTION You cannot deduct the amount deferred. It is not included as income in Form W-2, box 1. - 19 - • Disability pensions shown on Form 1099-R if you have not reached the minimum retirement age set by your employer. Disability pensions received after you reach that age and other payments shown on Form 1099-R (other than payments from an IRA*) are reported on lines 16a and 16b. Payments from an IRA are reported on lines 15a and 15b. • Corrective distributions from a retirement plan shown on Form 1099-R of excess salary deferrals, and excess contributions (plus earnings). But do not include distributions from an IRA* on line 7. Instead, report distributions from an IRA on lines 15a and 15b. *This includes a Roth, SEP, or SIMPLE IRA. Were You a Statutory Employee? If you were, the “Statutory employee” box in Form W-2, box 13, should be checked. Statutory employees include full-time life insurance salespeople, certain agent or commission drivers and traveling salespeople, and certain homeworkers. If you have related business expenses to deduct, report the amount shown in Form W-2, box 1, on Schedule C or C-EZ along with your expenses. Missing or Incorrect Form W-2? Your employer is required to provide or send Form W-2 to you no later than January 31, 2005. If you do not receive it by early February, use TeleTax topic 154 (see page 8) to find out what to do. Even if you do not get a Form W-2, you must still report your earnings on line 7. If you lose your Form W-2 or it is incorrect, ask your employer for a new one. Line 8a Taxable Interest Each payer should send you a Form 1099-INT or Form 1099-OID. Enter your total taxable interest income on line 8a. But you must fill in and attach Schedule B if the total is over $1,500 or any of the other conditions listed at the beginning of the Schedule B instructions (see page B-1) apply to you. Interest credited in 2004 on deposits that you could not withdraw because of the bankruptcy or insolvency of the financial institution may not have to be included in your 2004 income. For details, see Pub. 550. If you get a 2004 Form 1099-INT for U.S. savings bond interest that includes amounts you reported before 2004, see Pub. 550. TIP Need more information or forms? See page 7. Page 20 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 8b Through 10 Line 8b Tax-Exempt Interest If you received any tax-exempt interest, such as from municipal bonds, report it on line 8b. Include any exempt-interest dividends from a mutual fund or other regulated investment company. Do not include interest earned on your IRA or Coverdell education savings account. Line 9a Ordinary Dividends Each payer should send you a Form 1099-DIV. Enter your total ordinary dividends on line 9a. This amount should be shown in Form(s) 1099-DIV, box 1a. But you must fill in and attach Schedule B if the total is over $1,500 or you received, as a nominee, ordinary dividends that actually belong to someone else. Nondividend Distributions Some distributions are a return of your cost (or other basis). They will not be taxed until you recover your cost (or other basis). You must reduce your cost (or other basis) by these distributions. After you get back all of your cost (or other basis), you must report these distributions as capital gains on Schedule D. For details, see Pub. 550. Dividends on insurance policies are a partial return of the premiums you paid. Do not report them as dividends. Include them in income only if they exceed the total of all net premiums you paid for the contract. TIP Line 9b Qualified Dividends Enter your total qualified dividends on line 9b. Qualified dividends are eligible for a lower tax rate than other ordinary income. Generally, these dividends are shown in Form(s) 1099-DIV, box 1b. See Pub. 550 for the definition of qualified dividends if you received dividends not reported on Form 1099-DIV. Exception. Some dividends may be reported as qualified dividends in box 1b of Form 1099-DIV but are not qualified dividends. These include: • Dividends you received as a nominee. See the Instructions for Schedule B. • Dividends you received on any share of stock that you held for less than 61 days during the 121-day period that began 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock but not the day you acquired it. See the examples below. Also, when counting the number of days you held the stock, you cannot count certain days during which your risk of loss was diminished. See Pub. 550 for more details. • Dividends attributable to periods totaling more than 366 days that you received on any share of preferred stock held for less than 91 days during the 181-day period that began 90 days before the ex-dividend date. When counting the number of days you held the stock, you cannot count certain days during which your risk of loss was diminished. See Pub. 550 for more details. Preferred dividends attributable to periods totaling less than 367 days are subject to the 61-day holding period rule above. • Dividends on any share of stock to the extent that you are under an obligation (including a short sale) to make related payments with respect to positions in substantially similar or related property. • Payments in lieu of dividends, but only if you know or have reason to know that the payments are not qualified dividends. Example 1. You bought 5,000 shares of XYZ Corp. common stock on July 1, 2004. XYZ Corp. paid a cash dividend of 10 cents per share. The ex-dividend date was July 9, 2004. Your Form 1099-DIV from XYZ Corp. shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). However, you sold the 5,000 shares on August 4, 2004. You held your shares of XYZ Corp. for only 34 days of the 121-day period (from July 2, 2004, through August 4, 2004). The 121-day period began on May 10, 2004 (60 days before the ex-dividend date), and ended on September 7, 2004. You have no qualified dividends from XYZ Corp. because you held the XYZ stock for less than 61 days. Example 2. Assume the same facts as in Example 1 except that you bought the stock on July 8, 2004 (the day before the ex-dividend date), and you sold the stock on September 9, 2004. You held the stock for 63 days (from July 9, 2004, through September 9, 2004). The $500 of qualified dividends shown in Form 1099-DIV, box 1b, are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 9, 2004, through September 7, 2004). Example 3. You bought 10,000 shares of ABC Mutual Fund common stock on July 1, 2004. ABC Mutual Fund paid a cash dividend of 10 cents a share. The ex-dividend date was July 9, 2004. The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Need more information or forms? See page 7. - 20 - Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. However, you sold the 10,000 shares on August 4, 2004. You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Be sure you use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, whichever applies, to figure your tax. Your tax may be less if you use the worksheet that applies. See the instructions for line 43 that begin on page 33 for details. TIP Line 10 Taxable Refunds, Credits, or Offsets of State and Local Income Taxes TIP None of your refund is taxable if, in the year you paid the tax, you did not itemize deductions. If you received a refund, credit, or offset of state or local income taxes in 2004, you may receive a Form 1099-G. If you chose to apply part or all of the refund to your 2004 estimated state or local income tax, the amount applied is treated as received in 2004. If the refund was for a tax you paid in 2003 and you itemized deductions for 2003, use the worksheet on page 21 to see if any of your refund is taxable. Exception. See Recoveries in Pub. 525 in- stead of using the worksheet on page 21 if any of the following apply. • You received a refund in 2004 that is for a tax year other than 2003. • You received a refund other than an income tax refund, such as a real property tax refund, in 2004 of an amount deducted or credit claimed in an earlier year. • Your 2003 taxable income was less than zero. • You made your last payment of 2003 estimated state or local income tax in 2004. • You owed alternative minimum tax in 2003. • You could not deduct the full amount of credits you were entitled to in 2003 because the total credits exceeded the amount shown on your 2003 Form 1040, line 43. • You could be claimed as a dependent by someone else in 2003. Also, see Tax benefit rule in Pub. 525 instead of using the worksheet on page 21 if all of the following apply. • You had to use the Itemized Deductions Worksheet in the 2003 Schedule A instructions because your 2003 adjusted Page 21 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 10 Through 13 gross income was over $139,500 ($69,750 if married filing separately). • You could not deduct all of the amount on the 2003 Itemized Deductions Worksheet, line 1. • The amount on line 8 of that 2003 worksheet would be more than the amount on line 4 of that worksheet if the amount on line 4 were reduced by 80% of the refund you received in 2004. Line 11 Alimony Received Enter amounts received as alimony or separate maintenance. You must let the person who made the payments know your social security number. If you do not, you may have to pay a $50 penalty. For more details, use TeleTax topic 406 (see page 8) or see Pub. 504. Line 12 Business Income or (Loss) If you operated a business or practiced your profession as a sole proprietor, report your income and expenses on Schedule C or C-EZ. Line 13 Capital Gain or (Loss) If you had a capital gain or loss, including any capital gain distributions or a capital loss carryover from 2003, you must complete and attach Schedule D. Exception. You do not have to file Schedule D if both of the following apply. • The only amounts you have to report on Schedule D are capital gain distributions from Form(s) 1099-DIV, box 2a, or substitute statements. • None of the Form(s) 1099-DIV or substitute statements have an amount in box 2b (unrecaptured section 1250 gain), box 2c (section 1202 gain), or box 2d (collectibles (28%) gain). If both of the above apply, enter your total capital gain distributions (from box 2a of Form(s) 1099-DIV) on line 13 and check the box on that line. If you received capital gain distributions as a nominee (that is, they were paid to you but actually belong to someone else), report on line 13 only the amount that belongs to you. Attach a statement showing the full amount you received and the amount you received as a nominee. See the Instructions for Schedule B for filing requirements for Forms 1099-DIV and 1096. If you do not have to file Schedule D, be sure you use the Qualified Dividends and Capital Gain Tax Worksheet on page 34 to figure your tax. Your tax may be less if you use this worksheet. TIP State and Local Income Tax Refund Worksheet—Line 10 Keep for Your Records 1. Enter the income tax refund from Form(s) 1099-G (or similar statement). But do not enter more than the amount on your 2003 Schedule A (Form 1040), line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter your total allowable itemized deductions from your 2003 Schedule A (Form 1040), line 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Note. If the filing status on your 2003 Form 1040 was married filing separately and your spouse itemized deductions in 2003, skip lines 3, 4, and 5, and enter the amount from line 2 on line 6. 3. Enter the amount shown below for the filing status claimed on your 2003 Form 1040. • Single or married filing separately — $4,750 • Married filing jointly or qualifying widow(er) — $9,500 . . 3. • Head of household — $7,000 4. Did you fill in line 36a on your 2003 Form 1040? No. Enter -0-. Yes. Multiply the number in the box on line 36a of your 2003 Form 1040 by: $950 if your 2003 filing status was married filing jointly or separately or qualifying 4. widow(er); $1,150 if your 2003 filing status was single or head of household. 5. Add lines 3 and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Is the amount on line 5 less than the amount on line 2? No. STOP None of your refund is taxable. } } Yes. Subtract line 5 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 7. Taxable part of your refund. Enter the smaller of line 1 or line 6 here and on Form 1040, line 10 7. - 21 - Need more information or forms? See page 7. Page 22 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 14 Through 16b Line 14 Other Gains or (Losses) If you sold or exchanged assets used in a trade or business, see the Instructions for Form 4797. Lines 15a and 15b IRA Distributions You should receive a Form 1099-R showing the amount of any distribution from your individual retirement arrangement (IRA). Unless otherwise noted in the line 15a and 15b instructions, an IRA includes a traditional IRA, Roth IRA, simplified employee pension (SEP) IRA, and a savings incentive match plan for employees (SIMPLE) IRA. Except as provided below, leave line 15a blank and enter the total distribution on line 15b. Exception 1. Enter the total distribution on line 15a if you rolled over part or all of the distribution from one: • IRA to another IRA of the same type (for example, from one traditional IRA to another traditional IRA), or • SEP or SIMPLE IRA to a traditional IRA. Also, put “Rollover” next to line 15b. If the total distribution was rolled over in a qualified rollover, enter -0- on line 15b. If the total distribution was not rolled over in a qualified rollover, enter the part not rolled over on line 15b unless Exception 2 applies to the part not rolled over. Generally, a qualified rollover must be made within 60 days after the day you received the distribution. For more details on rollovers, see Pub. 590. If you rolled over the distribution (a) in 2005, or (b) from an IRA into a qualified plan (other than an IRA), attach a statement explaining what you did. Exception 2. If any of the following apply, enter the total distribution on line 15a and see Form 8606 and its instructions to figure the amount to enter on line 15b. 1. You received a distribution from an IRA (other than a Roth IRA) and you made nondeductible contributions to any of your traditional or SEP IRAs for 2004 or an earlier year. If you made nondeductible contributions to these IRAs for 2004, also see Pub. 590. 2. You received a distribution from a Roth IRA. But if either (a) or (b) below applies, enter -0- on line 15b; you do not have to see Form 8606 or its instructions. a. Distribution code T is shown in Form 1099-R, box 7, and you made a contribution (including a conversion) to a Roth IRA for 1998 or 1999. b. Distribution code Q is shown in Form 1099-R, box 7. 3. You converted part or all of a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2004. 4. You had a 2003 or 2004 IRA contribution returned to you, with the related earnings or less any loss, by the due date (including extensions) of your tax return for that year. 5. You made excess contributions to your IRA for an earlier year and had them returned to you in 2004. 6. You recharacterized part or all of a contribution to a Roth IRA as a traditional IRA contribution, or vice versa. Note. If you (or your spouse if filing jointly) received more than one distribution, figure the taxable amount of each distribution and enter the total of the taxable amounts on line 15b. Enter the total amount of those distributions on line 15a. You may have to pay an additional tax if (a) you received an early distribution from your CAUTION IRA and the total was not rolled over, or (b) you were born before July 1, 1933, and received less than the minimum required distribution from your traditional, SEP, and SIMPLE IRAs. See the instructions for line 59 on page 39 for details. ! Lines 16a and 16b Pensions and Annuities You should receive a Form 1099-R showing the amount of your pension and annuity payments. See pages 23 and 24 for details on rollovers and lump-sum distributions. Do not include the following payments on lines 16a and 16b. Instead, report them on line 7. • Disability pensions received before you reach the minimum retirement age set by your employer. • Corrective distributions of excess salary deferrals or excess contributions to retirement plans. TIP Attach Form(s) 1099-R to Form 1040 if any federal income tax was withheld. Fully Taxable Pensions and Annuities If your pension or annuity is fully taxable, enter it on line 16b; do not make an entry on line 16a. Your payments are fully taxable if (a) you did not contribute to the cost (see page 23) of your pension or annuity, or (b) you got your entire cost back tax free before 2004. Fully taxable pensions and annuities also include military retirement pay shown Need more information or forms? See page 7. - 22 - on Form 1099-R. For details on military disability pensions, see Pub. 525. If you received a Form RRB-1099-R, see Pub. 575 to find out how to report your benefits. Partially Taxable Pensions and Annuities Enter the total pension or annuity payments you received in 2004 on line 16a. If your Form 1099-R does not show the taxable amount, you must use the General Rule explained in Pub. 939 to figure the taxable part to enter on line 16b. But if your annuity starting date (defined below) was after July 1, 1986, see Simplified Method below to find out if you must use that method to figure the taxable part. You can ask the IRS to figure the taxable part for you for a $95 fee. For details, see Pub. 939. If your Form 1099-R shows a taxable amount, you may report that amount on line 16b. But you may be able to report a lower taxable amount by using the General Rule or the Simplified Method. Annuity Starting Date Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan’s obligations became fixed. Simplified Method You must use the Simplified Method if either of the following applies. 1. Your annuity starting date (defined above) was after July 1, 1986, and you used this method last year to figure the taxable part. 2. Your annuity starting date was after November 18, 1996, and both of the following apply. a. The payments are from a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity. b. On your annuity starting date, either you were under age 75 or the number of years of guaranteed payments was fewer than 5. See Pub. 575 for the definition of guaranteed payments. If you must use the Simplified Method, complete the worksheet on page 23 to figure the taxable part of your pension or annuity. For more details on the Simplified Method, see Pub. 575 or Pub. 721 for U.S. Civil Service retirement benefits. If you received U.S. Civil Service retirement benefits and you chose the alternative annuity CAUTION option, see Pub. 721 to figure the taxable part of your annuity. Do not use the worksheet on page 23. ! Page 23 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 16a and 16b Age (or Combined Ages) at Annuity Starting Date If you are the retiree, use your age on the annuity starting date. If you are the survivor of a retiree, use the retiree’s age on his or her annuity starting date. But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, use your combined ages on the annuity starting date. If you are the beneficiary of an employee who died, see Pub. 575. If there is more than one beneficiary, see Pub. 575 or Pub. 721 to figure each beneficiary’s taxable amount. Cost Your cost is generally your net investment in the plan as of the annuity starting date. It does not include pre-tax contributions. Your net investment should be shown in Form 1099-R, box 9b, for the first year you received payments from the plan. Rollovers Generally, a qualified rollover is a tax-free distribution of cash or other assets from one retirement plan that is contributed to another plan within 60 days of receiving the distribution. Use lines 16a and 16b to report a qualified rollover, including a direct rollover, from one qualified employer’s plan to another or to an IRA or SEP. Enter on line 16a the total distribution before income tax or other deductions were Simplified Method Worksheet—Lines 16a and 16b Before you begin: Keep for Your Records ⻫ If you are the beneficiary of a deceased employee or former employee who died before August 21, 1996, include any death benefit exclusion that you are entitled to (up to $5,000) in the amount entered on line 2 below. Note. If you had more than one partially taxable pension or annuity, figure the taxable part of each separately. Enter the total of the taxable parts on Form 1040, line 16b. Enter the total pension or annuity payments received in 2004 on Form 1040, line 16a. 1. Enter the total pension or annuity payments received in 2004. Also, enter this amount on Form 1040, line 16a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter your cost in the plan at the annuity starting date . . . . . . . . . . . . . . . . . . . . . 2. 3. Enter the appropriate number from Table 1 below. But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below . . . . . . . . . . . . . . . 3. 4. Divide line 2 by the number on line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. Multiply line 4 by the number of months for which this year’s payments were made. If your annuity starting date was before 1987, skip lines 6 and 7 and enter this amount on line 8. Otherwise, go to line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Enter the amount, if any, recovered tax free in years after 1986 . . . . . . . . . . . . . . 6. 7. Subtract line 6 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. Enter the smaller of line 5 or line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Taxable amount. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, enter this amount on Form 1040, line 16b. If your Form 1099-R shows a larger amount, use the amount on this line instead of the amount from Form 1099-R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. IF the age at annuity starting date (see above) was . . . 55 or under 56–60 61–65 66–70 71 or older Table 1 for Line 3 Above AND your annuity starting date was — before November 19, 1996, after November 18, 1996, enter on line 3 . . . enter on line 3 . . . 300 260 240 170 120 360 310 260 210 160 Table 2 for Line 3 Above IF the combined ages at annuity starting date (see above) were . . . THEN enter on line 3 . . . 110 or under 111–120 121–130 131–140 141 or older 410 360 310 260 210 - 23 - Need more information or forms? See page 7. Page 24 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 16a Through 21 withheld. This amount should be shown in Form 1099-R, box 1. From the total on line 16a, subtract any contributions (usually shown in box 5) that were taxable to you when made. From that result, subtract the amount of the qualified rollover. Enter the remaining amount, even if zero, on line 16b. Also, enter ‘‘Rollover’’ next to line 16b. Special rules apply to partial rollovers of property. For more details on rollovers, including distributions under qualified domestic relations orders, see Pub. 575. Lump-Sum Distributions If you received a lump-sum distribution from a profit-sharing or retirement plan, your Form 1099-R should have the ‘‘Total distribution’’ box in box 2b checked. You may owe an additional tax if you received an early distribution from a qualified retirement plan and the total amount was not rolled over in a qualified rollover. For details, see the instructions for line 59 on page 39. Enter the total distribution on line 16a and the taxable part on line 16b. You may be able to pay less tax on the distribution if you were born before January 2, 1936, or you are the beneficiary of a deceased employee who was born before January 2, 1936. For details, see Form 4972. TIP Line 19 Unemployment Compensation You should receive a Form 1099-G showing the total unemployment compensation paid to you in 2004. If you received an overpayment of unemployment compensation in 2004 and you repaid any of it in 2004, subtract the amount you repaid from the total amount you received. Enter the result on line 19. Also, enter “Repaid” and the amount you repaid on the dotted line next to line 19. If, in 2004, you repaid unemployment compensation that you included in gross income in an earlier year, you may deduct the amount repaid on Schedule A, line 22. But if you repaid more than $3,000, see Repayments in Pub. 525 for details on how to report the repayment. Lines 20a and 20b Social Security Benefits You should receive a Form SSA-1099 showing in box 3 the total social security benefits paid to you. Box 4 will show the amount of any benefits you repaid in 2004. If you received railroad retirement benefits treated as social security, you should receive a Form RRB-1099. Use the worksheet on page 25 to see if any of your benefits are taxable. Exception. Do not use the worksheet on page 25 if any of the following apply. • You made contributions to a traditional IRA for 2004 and you or your spouse were covered by a retirement plan at work or through self-employment. Instead, use the worksheets in Pub. 590 to see if any of your social security benefits are taxable and to figure your IRA deduction. • You repaid any benefits in 2004 and your total repayments (box 4) were more than your total benefits for 2004 (box 3). None of your benefits are taxable for 2004. Also, you may be able to take an itemized deduction or a credit for part of the excess repayments if they were for benefits you included in gross income in an earlier year. For more details, see Pub. 915. • You file Form 2555, 2555-EZ, 4563, or 8815, or you exclude employer-provided adoption benefits or income from sources within Puerto Rico. Instead, use the worksheet in Pub. 915. Line 21 Other Income Do not report on this line any income from self-employment or fees received as a notary CAUTION public. Instead, you must use Schedule C, C-EZ, or F, even if you do not have any business expenses. Also, do not report on line 21 any nonemployee compensation shown on Form 1099-MISC. Instead, see the chart on page 15 to find out where to report that income. Use line 21 to report any income not reported elsewhere on your return or other schedules. See the examples below. List the type and amount of income. If necessary, show the required information on an attached statement. For more details, see Miscellaneous Income in Pub. 525. ! Do not report any nontaxable amounts on line 21, such as TIP child support; money or property that was inherited, willed to you, or received as a gift; or life insurance proceeds received because of a person’s death. Examples of income to report on line 21 are: Need more information or forms? See page 7. - 24 - • Taxable distributions from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). Distributions from these accounts may be taxable if (a) they are more than the qualified higher education expenses of the designated beneficiary in 2004, and (b) they were not included in a qualified rollover. See Pub. 970. You may have to pay an additional tax if you received a taxable distribution from a CAUTION Coverdell ESA or a QTP. See the Instructions for Form 5329. ! • Taxable distributions from a health savings account (HSA) or an Archer MSA. Distributions from these accounts may be taxable if (a) they are more than the unreimbursed qualified medical expenses of the account beneficiary or account holder in 2004, and (b) they were not included in a qualified rollover. See Pub. 969. You may have to pay an additional tax if you received a taxable distribution from an HSA CAUTION or an Archer MSA. See the Instructions for Form 8889 for HSAs or the Instructions for Form 8853 for Archer MSAs. • Prizes and awards. • Gambling winnings, including lotteries, raffles, a lump-sum payment from the sale of a right to receive future lottery payments, etc. For details on gambling losses, see the instructions for Schedule A, line 27, on page A-6. ! TIP Attach Form(s) W-2G to Form 1040 if any federal income tax was withheld. • Jury duty fees. Also, see the instructions for line 35 on page 31. • Alaska Permanent Fund dividends. • Reimbursements or other amounts received for items deducted in an earlier year, such as medical expenses, real estate taxes, or home mortgage interest. See Recoveries in Pub. 525 for details on how to figure the amount to report. • Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property. Also, see the instructions for line 35 on page 31. • Income from an activity not engaged in for profit. See Pub. 535. • Loss on certain corrective distributions of excess deferrals. See Retirement Plan Contributions in Pub. 525. Page 25 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 20a and 20b Social Security Benefits Worksheet—Lines 20a and 20b Before you begin: ⻫ ⻫ ⻫ ⻫ Keep for Your Records Complete Form 1040, lines 21, 23 through 25, and 28 through 34a, if they apply to you. Figure any write-in adjustments to be entered on the dotted line next to line 35 (see the instructions for line 35 on page 31). If you are married filing separately and you lived apart from your spouse for all of 2004, enter “D” to the right of the word “benefits” on line 20a. Be sure you have read the Exception on page 24 to see if you can use this worksheet instead of a publication to find out if any of your benefits are taxable. 1. Enter the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Enter the total of the amounts from Form 1040, lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Enter the amount, if any, from Form 1040, line 8b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Enter the total of the amounts from Form 1040, lines 23 through 25, and 28 through 34a, plus any write-in adjustments you entered on the dotted line next to line 35 . . . . . . . . . . . . . . . . . . . 7. Is the amount on line 6 less than the amount on line 5? No. STOP None of your social security benefits are taxable. 2. 3. 4. 5. 6. Yes. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. If you are: • Married filing jointly, enter $32,000 • Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2004, enter $25,000 . . . . . . . . . . . . . . 8. • Married filing separately and you lived with your spouse at any time in 2004, skip lines 8 through 15; multiply line 7 by 85% (.85) and enter the result on line 16. Then go to line 17 9. Is the amount on line 8 less than the amount on line 7? No. STOP None of your social security benefits are taxable. You do not have to enter any amounts on line 20a or 20b of Form 1040. But if you are married filing separately and you lived apart from your spouse for all of 2004, enter -0- on line 20b. Be sure you entered “D” to the right of the word “benefits” on line 20a. Yes. Subtract line 8 from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 10. Enter: $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2004 . . 10. 11. Subtract line 10 from line 9. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 13. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 14. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 15. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. 16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 17. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 18. Taxable social security benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . 18. • Enter the amount from line 1 above on Form 1040, line 20a. • Enter the amount from line 18 above on Form 1040, line 20b. } TIP If any of your benefits are taxable for 2004 and they include a lump-sum benefit payment that was for an earlier year, you may be able to reduce the taxable amount. See Pub. 915 for details. - 25 - Need more information or forms? See page 7. Page 26 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 23 Through 25 Adjusted Gross Income Line 23 Educator Expenses If you were an eligible educator in 2004, you can deduct up to $250 of qualified expenses you paid in 2004. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year. Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts. • Excludable U.S. series EE and I savings bond interest from Form 8815. • Nontaxable qualified tuition program earnings. • Nontaxable earnings from Coverdell education savings accounts. • Any reimbursements you received for these expenses that were not reported to you in Form W-2, box 1. For more details, use TeleTax topic 458 (see page 8). Line 24 Certain Business Expenses of Reservists, Performing Artists, and Fee-Basis Government Officials Include the following deductions on line 24. • Certain business expenses of National Guard and reserve members who traveled more than 100 miles from home to perform services as a National Guard or reserve member. • Performing-arts-related expenses as a qualified performing artist. • Business expenses of fee-basis state or local government officials. For more details, see Form 2106 or 2106-EZ. Line 25 IRA Deduction If you made any nondeductible contributions to a traditional inTIP dividual retirement arrangement (IRA) for 2004, you must report them on Form 8606. If you made contributions to a traditional IRA for 2004, you may be able to take an IRA deduction. But you, or your spouse if filing a joint return, must have had earned income to do so. For IRA purposes, earned income includes alimony and separate maintenance payments reported on line 11. A statement should be sent to you by May 31, 2005, that shows all contributions to your traditional IRA for 2004. Use the worksheet on page 27 to figure the amount, if any, of your IRA deduction. But read the following list before you fill in the worksheet. • If you were age 701⁄2 or older at the end of 2004, you cannot deduct any contributions made to your traditional IRA for 2004 or treat them as nondeductible contributions. • You cannot deduct contributions to a Roth IRA. But you may be able to take the retirement savings contributions credit. See the instructions for line 50 on page 36. If you made contributions to both a traditional IRA and a Roth IRA for 2004, do not use CAUTION the worksheet on page 27. Instead, see Pub. 590 to figure the amount, if any, of your IRA deduction. ! • You cannot deduct elective deferrals to a 401(k) plan, section 457 plan, SIMPLE plan, or the federal Thrift Savings Plan. These amounts are not included as income in Form W-2, box 1. But you may be able to take the retirement savings contributions credit. See the instructions for line 50 on page 36. • If you made contributions to your IRA in 2004 that you deducted for 2003, do not include them in the worksheet. • If you received a distribution from a nonqualified deferred compensation plan or nongovernmental section 457 plan that is included in Form W-2, box 1, do not include that distribution on line 8 of the worksheet. The distribution should be Need more information or forms? See page 7. - 26 - shown in Form W-2, box 11. If it is not, contact your employer for the amount of the distribution. • You must file a joint return to deduct contributions to your spouse’s IRA. Enter the total IRA deduction for you and your spouse on line 25. • Do not include qualified rollover contributions in figuring your deduction. Instead, see the instructions for lines 15a and 15b on page 22. • Do not include trustees’ fees that were billed separately and paid by you for your IRA. These fees can be deducted only as an itemized deduction on Schedule A. • If the total of your IRA deduction on line 25 plus any nondeductible contribution to your traditional IRAs shown on Form 8606 is less than your total traditional IRA contributions for 2004, see Pub. 590 for special rules. By April 1 of the year after the year in which you turn age 701⁄2, TIP you must start taking minimum required distributions from your traditional IRA. If you do not, you may have to pay a 50% additional tax on the amount that should have been distributed. For details, including how to figure the minimum required distribution, see Pub. 590. Were You Covered by a Retirement Plan? If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc.) at work or through self-employment, your IRA deduction may be reduced or eliminated. But you can still make contributions to an IRA even if you cannot deduct them. In any case, the income earned on your IRA contributions is not taxed until it is paid to you. The “Retirement plan” box in Form W-2, box 13, should be checked if you were covered by a plan at work even if you were not vested in the plan. You are also covered by a plan if you were self-employed and had a SEP, SIMPLE, or qualified retirement plan. If you were covered by a retirement plan and you file Form 2555, 2555-EZ, or 8815, or you exclude employer-provided adoption benefits, see Pub. 590 to figure the amount, if any, of your IRA deduction. Married persons filing separately. If you were not covered by a retirement plan but your spouse was, you are considered covered by a plan unless you lived apart from your spouse for all of 2004. Page 27 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 25 IRA Deduction Worksheet—Line 25 Before you begin: ⻫ ⻫ ⻫ Keep for Your Records Complete Form 1040, lines 28 through 34a, if they apply to you. Figure any write-in adjustments to be entered on the dotted line next to line 35 (see the instructions for line 35 on page 31). Be sure you have read the list on page 26. Your IRA 1a. b. 2. 3. 4. 5. 6. 7. 8. Spouse’s IRA Were you covered by a retirement plan (see page 26)? . . . . . . . . . . . . . . . . . . . . 1a. Yes No If married filing jointly, was your spouse covered by a retirement plan? . . . . . . . . . . . . . . . . . . . . . . . . . 1b. Next. If you checked “No” on line 1a (and “No” on line 1b if married filing jointly), skip lines 2 through 6, enter $3,000 ($3,500 if age 50 or older at the end of 2004) on line 7a (and 7b if applicable), and go to line 8. Otherwise, go to line 2. Enter the amount shown below that applies to you. • Single, head of household, or married filing separately and you lived apart from your spouse for all of 2004, enter $55,000 • Qualifying widow(er), enter $75,000 2a. 2b. • Married filing jointly, enter $75,000 in both columns. But if you checked “No” on either line 1a or 1b, enter $160,000 for the person who was not covered by a plan • Married filing separately and you lived with your spouse at any time in 2004, enter $10,000 Enter the amount from Form 1040, line 22 . . . . . . . . . . 3. Enter the total of the amounts from Form 1040, lines 23, 24, 28 through 34a, plus any write-in adjustments you entered on the dotted line next to line 35 . . . . . . . . . . . 4. Subtract line 4 from line 3. Enter the result in both columns . . . . . . . . . . . . . . . . 5a. 5b. Is the amount on line 5 less than the amount on line 2? No. STOP None of your IRA contributions are deductible. For details on nondeductible IRA contributions, see Form 8606. Yes. Subtract line 5 from line 2 in each column. If the result is $10,000 or more, enter $3,000 ($3,500 if age 50 or older at the end of 2004) on line 7 for that column and go to line 8. Otherwise, go to line 7 . . . . 6a. 6b. Multiply lines 6a and 6b by 30% (.30) (or by 35% (.35) in the column for the IRA of a person who is age 50 or older at the end of 2004). If the result is not a multiple of $10, increase it to the next multiple of $10 (for example, increase $490.30 to $500). If the result is $200 or more, enter the result. But if it is less than $200, enter $200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7a. 7b. Enter your wages, and your spouse’s if filing jointly, and other earned income from Form 1040, minus any deductions on Form 1040, lines 30 and 32. Do not reduce wages by any loss from self-employment . . . . . . . . . . . 8. Yes No } If married filing jointly and line 8 is less than $6,000 ($6,500 if one spouse is age 50 or older at the end of 2004; $7,000 if both spouses are age 50 or older at the end of 2004), stop here and see Pub. 590 to CAUTION figure your IRA deduction. Enter traditional IRA contributions made, or that will be made by April 15, 2005, for 2004 to your IRA on line 9a and to your spouse’s IRA on line 9b . . . . . . . . . 9a. On line 10a, enter the smallest of line 7a, 8, or 9a. On line 10b, enter the smallest of line 7b, 8, or 9b. This is the most you can deduct. Add the amounts on lines 10a and 10b and enter the total on Form 1040, line 25. Or, if you want, you can deduct a smaller amount and treat the rest as a nondeductible contribution (see Form 8606) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10a. ! 9. 10. TIP 9b. 10b. You may be able to take the retirement savings contributions credit. See the instructions for line 50 on page 36. - 27 - Need more information or forms? See page 7. Page 28 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 26 Line 26 Student Loan Interest Deduction You can take this deduction only if all of the following apply. • You paid interest in 2004 on a qualified student loan (see below). • Your filing status is any status except married filing separately. • Your modified adjusted gross income (AGI) is less than: $65,000 if single, head of household, or qualifying widow(er); $130,000 if married filing jointly. Use lines 2 through 4 of the worksheet below to figure your modified AGI. • You are not claimed as a dependent on someone’s (such as your parent’s) 2004 tax return. Use the worksheet below to figure your student loan interest deduction. Exception. Use Pub. 970 instead of the worksheet below to figure your student loan interest deduction if you file Form 2555, 2555-EZ, or 4563, or you exclude income from sources within Puerto Rico. tion expenses for yourself, your spouse, or anyone who was your dependent when the loan was taken out. The person for whom the expenses were paid must have been an eligible student (see this page). However, a loan is not a qualified student loan if (a) any of the proceeds were used for other purposes, or (b) the loan was from either a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. To find out who is a related person, see Pub. 970. Qualified higher education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. An eligible educational institution includes most colleges, universities, and certain vocational schools. You must reduce the expenses by the following benefits. • Employer-provided educational assistance benefits that are not included in Form(s) W-2, box 1. • Excludable U.S. series EE and I savings bond interest from Form 8815. • Nontaxable qualified tuition program earnings. • Nontaxable earnings from Coverdell education savings accounts. • Any scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income. For more details on these expenses, see Pub. 970. An eligible student is a person who: • Was enrolled in a degree, certificate, or other program (including a program of study abroad that was approved for credit by the institution at which the student was enrolled) leading to a recognized educational credential at an eligible educational institution, and • Carried at least half the normal full-time workload for the course of study he or she was pursuing. A qualified student loan is any loan you took out to pay the qualified higher educa- Student Loan Interest Deduction Worksheet—Line 26 Before you begin: ⻫ ⻫ ⻫ ⻫ Keep for Your Records Complete Form 1040, lines 28 through 34a, if they apply to you. Figure any write-in adjustments to be entered on the dotted line next to line 35 (see the instructions for line 35 on page 31). See the instructions for line 26 above. Be sure you have read the Exception above to see if you can use this worksheet instead of Pub. 970 to figure your deduction. 1. Enter the total interest you paid in 2004 on qualified student loans (see above). Do not enter more than $2,500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1. 2. Enter the amount from Form 1040, line 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 3. Enter the total of the amounts from Form 1040, lines 23 through 25, 28 through 34a, plus any write-in adjustments you entered on the dotted line next to line 35 . . 3. 4. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. Enter the amount shown below for your filing status. • Single, head of household, or qualifying widow(er) —$50,000 . . . . . . . . . 5. • Married filing jointly —$100,000 6. Is the amount on line 4 more than the amount on line 5? No. Skip lines 6 and 7, enter -0- on line 8, and go to line 9. Yes. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 7. Divide line 6 by $15,000 ($30,000 if married filing jointly). Enter the result as a decimal (rounded to at least three places). If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . .7. 8. Multiply line 1 by line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8. 9. Student loan interest deduction. Subtract line 8 from line 1. Enter the result here and on Form 1040, line 26. Do not include this amount in figuring any other deduction on your return (such as on Schedule A, C, E, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9. } Need more information or forms? See page 7. - 28 - . Page 29 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 27 Through 29 Line 27 Tuition and Fees Deduction You can take this deduction only if all of the following apply. • You paid qualified tuition and fees (see this page) in 2004 for yourself, your spouse, or your dependent(s). • Your filing status is any status except married filing separately. • Your modified adjusted gross income (AGI) is not more than: $80,000 if single, head of household, or qualifying widow(er); $160,000 if married filing jointly. Use lines 1 through 3 of the worksheet below to figure your modified AGI. • You cannot be claimed as a dependent on someone’s (such as your parent’s) 2004 tax return. • You are not claiming an education credit for the same student. See the instructions for line 49 on page 36. • You were a U.S. citizen or resident alien for all of 2004 or you were a nonresident alien for any part of 2004 and you are filing a joint return. Use the worksheet below to figure your tuition and fees deduction. Exception. Use Pub. 970 instead of the worksheet below to figure your tuition and fees deduction if you file Form 2555, 2555-EZ, or 4563, or you exclude income from sources within Puerto Rico. Qualified tuition and fees are amounts paid in 2004 for tuition and fees required for the student’s enrollment or attendance at an eligible educational institution during 2004. Tuition and fees paid in 2004 for an academic period that begins in the first 3 months of 2005 can also be used in figuring your deduction. Amounts paid include those paid by credit card or with borrowed funds. An eligible educational institution includes most colleges, universities, and certain vocational schools. Qualified tuition and fees do not include amounts paid for the following amounts. • Room and board, insurance, medical expenses (including student health fees), transportation, or other similar personal, living, or family expenses. • Course-related books, supplies, equipment, and nonacademic activities, except for fees required to be paid to the institution as a condition of enrollment or attendance. • Any course involving sports, games, or hobbies, unless such course is part of the student’s degree program. Qualified tuition and fees must be reduced by the following benefits. • Excludable U.S. series EE and I savings bond interest from Form 8815. • Nontaxable qualified tuition program earnings. • Nontaxable earnings from Coverdell education savings accounts. • Any scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income. For more details, use TeleTax topic 457 (see page 8) or see Pub. 970. You may be able to take a credit for your educational expenses instead of a deduction. See the instructions for line 49 on page 36 for details. TIP Line 28 Health Savings Account Deduction If contributions (other than employer contributions) were made to your health savings account for 2004, you may be able to take this deduction. See Form 8889. Line 29 Moving Expenses If you moved in connection with your job or business or started a new job, you may be able to take this deduction. But your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace. If you had no former workplace, your new workplace must be at least 50 miles from your old home. Use TeleTax topic 455 (see page 8) or see Form 3903. Tuition and Fees Deduction Worksheet—Line 27 Before you begin: ⻫ ⻫ ⻫ ⻫ Keep for Your Records Complete Form 1040, lines 28 through 34a, if they apply to you. Figure any write-in adjustments to be entered on the dotted line next to line 35 (see the instructions for line 35 on page 31). See the instructions for line 27 above. Be sure you have read the Exception above to see if you can use this worksheet instead of Pub. 970 to figure your deduction. 1. Enter the amount from Form 1040, line 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Enter the total of the amounts from Form 1040, lines 23 through 26, 28 through 34a, plus any write-in adjustments you entered on the dotted line next to line 35 . . . . . . . . . . . . . . . . . . . . . . 3. Subtract line 2 from line 1. If the result is more than $80,000 ($160,000 if married filing jointly), STOP 2. You cannot take the deduction for tuition and fees . . . . . . . . . . . . . . . . . . . . . . . . 4. Tuition and fees deduction. Is the amount on line 3 more than $65,000 ($130,000 if married filing jointly)? Yes. Enter the total qualified tuition and fees (defined above) you paid in 2004. Do not enter more than $2,000. Also, enter this amount on Form 1040, line 27. No. 1. Enter the total qualified tuition and fees (defined above) you paid in 2004. Do not enter more than $4,000. Also, enter this amount on Form 1040, line 27. 3. } 4. Note. Do not include this amount in figuring any other deduction on your return (such as on Schedule A, C, E, etc.). - 29 - Need more information or forms? See page 7. Page 30 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 30 Through 34b Line 30 One-Half of Self-Employment Tax If you were self-employed and owe self-employment tax, fill in Schedule SE to figure the amount of your deduction. Line 31 Self-Employed Health Insurance Deduction You may be able to deduct the amount you paid for health insurance for yourself, your spouse, and your dependents if any of the following apply. • You were self-employed and had a net profit for the year. • You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. • You received wages in 2004 from an S corporation in which you were a more-than-2% shareholder. Health insurance benefits paid for you may be shown in Form W-2, box 14. The insurance plan must be established under your business. But if you were also eligible to participate in any subsidized health plan maintained by your or your spouse’s employer for any month or part of a month in 2004, amounts paid for health insurance coverage for that month cannot be used to figure the deduction. For example, if you were eligible to participate in a subsidized health plan maintained by your spouse’s employer from September 30 through December 31, you cannot use amounts paid for health insurance coverage for September through December to figure your deduction. For more details, see Pub. 535. • You are using amounts paid for qualified long-term care insurance to figure the deduction. Note. If, during 2004, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, you must complete Form 8885 before completing the worksheet below. When figuring the amount to enter on line 1 of the worksheet below, do not include any health coverage tax credit advance payments shown in Form 1099-H, box 1. Also, subtract the amount shown on Form 8885, line 4, (reduced by any advance payments shown on line 6 of that form) from the total insurance premiums you paid. If you were self-employed or a partner, you may be able to take this deduction. See Pub. 560 or, if you were a minister, Pub. 517. If you qualify to take the deduction, use the worksheet below to figure the amount you can deduct. Exception. Use Pub. 535 instead of the worksheet below to find out how to figure your deduction if any of the following apply. • You had more than one source of income subject to self-employment tax. • You file Form 2555 or 2555-EZ. Self-Employed Health Insurance Deduction Worksheet—Line 31 Before you begin: ⻫ ⻫ ⻫ Line 32 Self-Employed SEP, SIMPLE, and Qualified Plans Line 33 Penalty on Early Withdrawal of Savings The Form 1099-INT or Form 1099-OID you received will show the amount of any penalty you were charged. Lines 34a and 34b Alimony Paid If you made payments to or for your spouse or former spouse under a divorce or separation instrument, you may be able to take this deduction. Use TeleTax topic 452 (see page 8) or see Pub. 504. Keep for Your Records Complete Form 1040, line 32, if it applies to you. If, during 2004, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, see the Note above. Be sure you have read the Exception above to see if you can use this worksheet instead of Pub. 535 to figure your deduction. 1. Enter the total amount paid in 2004 for health insurance coverage established under your business for 2004 for you, your spouse, and your dependents. But do not include amounts for any month you were eligible to participate in an employer-sponsored health plan . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter your net profit* and any other earned income** from the business under which the insurance plan is established, minus any deductions on Form 1040, lines 30 and 32 . . . . . . . . . . . . . . . . . . . 2. 3. Self-employed health insurance deduction. Enter the smaller of line 1 or line 2 here and on Form 1040, line 31. Do not include this amount in figuring any medical expense deduction on Schedule A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. * If you used either optional method to figure your net earnings from self-employment, do not enter your net profit. Instead, enter the amount from Schedule SE, line 4b. ** Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. It does not include capital gain income. If you were a more-than-2% shareholder in the S corporation under which the insurance plan is established, earned income is your wages from that corporation. Need more information or forms? See page 7. - 30 - Page 31 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 35 Through 39 Line 35 Include in the total on line 35 any of the following write-in adjustments. To find out if you can take the deduction, see the form or publication indicated. On the dotted line next to line 35, enter the amount of your deduction and identify it as indicated. • Archer MSA deduction (see Form 8853). Identify as “MSA.” • Jury duty pay if you gave the pay to your employer because your employer paid your salary while you served on the jury. Identify as “Jury Pay.” • Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Identify as “PPR.” • Reforestation amortization and expenses (see Pub. 535). Identify as “RFST.” • Repayment of supplemental unemployment benefits under the Trade Act of 1974 (see Pub. 525). Identify as “Sub-Pay TRA.” • Contributions to section 501(c)(18)(D) pension plans (see Pub. 525). Identify as “501(c)(18)(D).” • Contributions by certain chaplains to section 403(b) plans (see Pub. 517). Identify as “403(b).” • Attorney fees and court costs paid after October 22, 2004, for actions settled or decided after that date involving certain unlawful discrimination claims, but only to the extent of gross income from such actions (see Pub. 525). Identify as “UDC.” • Deduction for clean-fuel vehicles. If you placed a qualified clean-fuel vehicle in service in 2004, you can deduct $2,000 on line 35 if you did not use the vehicle in your business (other than as an employee). Identify this deduction on line 35 as “Clean-Fuel.” If you used a qualified clean-fuel vehicle or other clean-fuel vehicle property in your business (other than as an employee), claim the business portion of the deduction on the applicable line of Schedule C, E, or F. TIP There are higher deduction amounts for heavy trucks, vans, and buses. A qualified clean-fuel vehicle: 1. Must be acquired new and for your own use. 2. Must satisfy any federal and state emissions standards. 3. Is designed to be propelled by a clean-burning fuel, such as natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, or electricity. A qualified clean-fuel vehicle includes certain gasoline-electric hybrid vehicles such as the Honda Insight, Honda Civic Hybrid, and Toyota Prius. It does not include electric vehicles. You may be able to take a credit if you placed a new electric veTIP hicle in service in 2004. See Form 8834 for details. You may also be able to take this deduction for certain new property installed on a motor vehicle to enable it to be propelled by a clean-burning fuel. For more details, see Pub. 535. above, you can get a statement certified by your eye doctor or registered optometrist to this effect instead. You must keep the statement for your records. Line 38b If your spouse itemizes deductions on a separate return or if you were a dual-status alien, check the box on line 38b. But if you were a dual-status alien and you file a joint return with your spouse who was a U.S. citizen or resident at the end of 2004 and you and your spouse agree to be taxed on your combined worldwide income, do not check the box. Line 39 Line 36 If line 36 is less than zero, you may have a net operating loss that you can carry to another tax year. See the Instructions for Form 1045 for details. Itemized Deductions or Standard Deduction In most cases, your federal income tax will be less if you take the larger of your itemized deductions or standard deduction. ! Tax and Credits CAUTION If you checked the box on line 38b, your standard deduction is zero. Itemized Deductions Line 38a If you were born before January 2, 1940, or were blind at the end of 2004, check the appropriate box(es) on line 38a. If you were married and checked the box on Form 1040, line 6b, and your spouse was born before January 2, 1940, or was blind at the end of 2004, also check the appropriate box(es) for your spouse. Be sure to enter the total number of boxes checked. Blindness If you were partially blind as of December 31, 2004, you must get a statement certified by your eye doctor or registered optometrist that: • You cannot see better than 20/200 in your better eye with glasses or contact lenses, or • Your field of vision is 20 degrees or less. If your eye condition is not likely to improve beyond the conditions listed - 31 - To figure your itemized deductions, fill in Schedule A. Standard Deduction Most people can find their standard deduction by looking at the amounts listed under “All others” to the left of Form 1040, line 39. But if you, or your spouse if filing jointly, can be claimed as a dependent on someone’s 2004 return or you checked any box on line 38a, use the worksheet or the chart on page 32, whichever applies, to figure your standard deduction. Also, if you checked the box on line 38b, your standard deduction is zero, even if you were born before January 2, 1940, or were blind. Electing To Itemize for State Tax or Other Purposes If you itemize even though your itemized deductions are less than your standard deduction, enter “IE” on the dotted line next to line 39. Need more information or forms? See page 7. Page 32 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 39 Standard Deduction Worksheet for Dependents—Line 39 Keep for Your Records Use this worksheet only if someone can claim you, or your spouse if filing jointly, as a dependent. 1. 2. 3. 4. Add $250 to your earned income*. Enter the total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minimum standard deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the larger of line 1 or line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the amount shown below for your filing status. • Single or married filing separately —$4,850 • Married filing jointly or qualifying widow(er) —$9,700 . ..................... • Head of household —$7,150 5. Standard deduction. a. Enter the smaller of line 3 or line 4. If born after January 1, 1940, and not blind, stop here and enter this amount on Form 1040, line 39. Otherwise, go to line 5b . . . . . . . . . . . . . . . . . . . . . . . . b. If born before January 2, 1940, or blind, multiply the number on Form 1040, line 38a, by $950 ($1,200 if single or head of household) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c. Add lines 5a and 5b. Enter the total here and on Form 1040, line 39 . . . . . . . . . . . . . . . . . . . . . . } 1. 2. 3. 800.00 4. 5a. 5b. 5c. * Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also includes any amount received as a scholarship that you must include in your income. Generally, your earned income is the total of the amount(s) you reported on Form 1040, lines 7, 12, and 18, minus the amount, if any, on line 30. Standard Deduction Chart for People Who Were Born Before January 2, 1940, or Were Blind—Line 39 Do not use this chart if someone can claim you, or your spouse if filing jointly, as a dependent. Instead, use the worksheet above. Enter the number from the box on Form 1040, line 38a . . . . . . . . . . . . . . . . 䊳 IF your filing status is . . . ! CAUTION AND the number in the box above is . . . Do not use the number of exemptions from line 6d. THEN your standard deduction is . . . Single 1 2 $6,050 7,250 Married filing jointly or Qualifying widow(er) 1 2 3 4 $10,650 11,600 12,550 13,500 Married filing separately 1 2 3 4 $5,800 6,750 7,700 8,650 Head of household 1 2 $8,350 9,550 Need more information or forms? See page 7. - 32 - Page 33 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 41 and 43 Tax Table or Tax Computation Worksheet. If your taxable income is less than Line 43 Tax Do you want the IRS to figure your tax for you? 䡺 Yes. See Pub. 967 for details, including who is eligible and what to do. If you have paid too much, we will send you a refund. If you did not pay enough, we will send you a bill. 䡺 No. Use one of the following methods to figure your tax. Also include in the total on line 43 any of the following taxes. 1. Tax from Forms 8814 and 4972. Be sure to check the appropriate box(es). 2. Tax from recapture of an education credit. You may owe this tax if (a) you claimed an education credit in an earlier year, and (b) you, your spouse if filing jointly, or your dependent received in 2004 either tax-free educational assistance or a refund of qualified expenses. See Form 8863 for more details. If you owe this tax, enter the amount and “ECR” on the dotted line next to line 43. $100,000, you must use the Tax Table that begins on page 60 to figure your tax. Be sure you use the correct column. If your taxable income is $100,000 or more, use the Tax Computation Worksheet on page 72. However, do not use the Tax Table or Tax Computation Worksheet to figure your tax if any of the following apply. Form 8615. Form 8615 must generally be used to figure the tax for any child who was under age 14 at the end of 2004, and who had more than $1,600 of investment income, such as taxable interest, ordinary dividends, or capital gains (including capital gain distributions). But if neither of the child’s parents was alive at the end of 2004, do not use Form 8615 to figure the child’s tax. Also, a child born on January 1, 1991, is considered to be age 14 at the end of 2004. Do not use Form 8615 for such a child. Schedule D Tax Worksheet. If you have to file Schedule D and Schedule D, line 18 or 19, is more than zero, use the Schedule D Tax Worksheet on page D-9 of the Instructions for Schedule D to figure your tax. Qualified Dividends and Capital Gain Tax Worksheet. If you do not have to use the Schedule D Tax Worksheet (see above), use the worksheet on page 34 to figure your tax if any of the following apply. • You reported qualified dividends on Form 1040, line 9b. • You do not have to file Schedule D and you reported capital gain distributions on Form 1040, line 13. • You are filing Schedule D and Schedule D, lines 15 and 16, are both more than zero. Schedule J. If you had income from farming or fishing, your tax may be less if you choose to figure it using income averaging on Schedule J. Deduction for Exemptions Worksheet—Line 41 1. Keep for Your Records Is the amount on Form 1040, line 37, more than the amount shown on line 4 below for your filing status? Multiply $3,100 by the total number of exemptions claimed on Form 1040, line 6d, and enter the result on line 41. No. STOP Yes. Continue 䊲 2. Multiply $3,100 by the total number of exemptions claimed on Form 1040, line 6d . . . . . . . . . . . . . . . . . . 2. 3. Enter the amount from Form 1040, line 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 4. Enter the amount shown below for your filing status. • Single — $142,700 • Married filing jointly or qualifying widow(er) — $214,050 • Married filing separately — $107,025 • Head of household — $178,350 5. 7. ..... 4. Subtract line 4 from line 3. If the result is more than $122,500 ($61,250 if married filing separately), 6. } STOP You cannot take a deduction for exemptions . . . . . . . . . . . . . . . 5. Divide line 5 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next higher whole number (for example, increase 0.0004 to 1) 6. Multiply line 6 by 2% (.02) and enter the result as a decimal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. Multiply line 2 by line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Deduction for exemptions. Subtract line 8 from line 2. Enter the result here and on Form 1040, line 41 . . . 9. - 33 - . Need more information or forms? See page 7. Page 34 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 43 Qualified Dividends and Capital Gain Tax Worksheet—Line 43 Before you begin: ⻫ ⻫ Keep for Your Records See the instructions for line 43 on page 33 to see if you can use this worksheet to figure your tax. If you do not have to file Schedule D and you received capital gain distributions, be sure you checked the box on line 13 of Form 1040. 1. Enter the amount from Form 1040, line 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Enter the amount from Form 1040, line 9b . . . . . . . . . . 2. 3. Are you filing Schedule D? Yes. Enter the smaller of line 15 or 16 of Schedule D, but do not enter less than -03. No. Enter the amount from Form 1040, line 13 4. Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. If you are claiming investment interest expense on Form 4952, enter the amount from line 4g of that form. Otherwise, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Subtract line 5 from line 4. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . 6. 7. Subtract line 6 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . 7. 8. Enter the smaller of: • The amount on line 1, or • $29,050 if single or married filing separately, . . . . . . . . . . . 8. $58,100 if married filing jointly or qualifying widow(er), $38,900 if head of household. 9. Is the amount on line 7 equal to or more than the amount on line 8? Yes. Skip lines 9 through 11; go to line 12 and check the ‘‘No’’ box. No. Enter the amount from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 10. Subtract line 9 from line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 11. Multiply line 10 by 5% (.05) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 12. Are the amounts on lines 6 and 10 the same? Yes. Skip lines 12 through 15; go to line 16. No. Enter the smaller of line 1 or line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 13. Enter the amount from line 10 (if line 10 is blank, enter -0-) . . . . . . . . . . . . . . 13. 14. Subtract line 13 from line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 15. Multiply line 14 by 15% (.15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. 16. Figure the tax on the amount on line 7. Use the Tax Table or Tax Computation Worksheet, whichever applies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 17. Add lines 11, 15, and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 18. Figure the tax on the amount on line 1. Use the Tax Table or Tax Computation Worksheet, whichever applies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. 19. Tax on all taxable income. Enter the smaller of line 17 or line 18. Also include this amount on Form 1040, line 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. } } Need more information or forms? See page 7. - 34 - Page 35 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 44 Line 44 Alternative Minimum Tax Use the worksheet below to see if you should fill in Form 6251. Exception. Fill in Form 6251 instead of using the worksheet below if you claimed or received any of the following items. • Accelerated depreciation. • Stock by exercising an incentive stock option and you did not dispose of the stock in the same year. • Tax-exempt interest from private activity bonds. • Intangible drilling, circulation, research, experimental, or mining costs. • Amortization of pollution-control facilities or depletion. • Income or (loss) from tax-shelter farm activities or passive activities. • Income from long-term contracts not figured using the percentage-of-completion method. (Continued on page 36) Worksheet To See if You Should Fill in Form 6251—Line 44 Before you begin: ⻫ ⻫ • Interest paid on a home mortgage not used to buy, build, or substantially improve your home. • Investment interest expense reported on Form 4952. • Net operating loss deduction. • Alternative minimum tax adjustments from an estate, trust, electing large partnership, or cooperative. • Section 1202 exclusion. • A general business credit. Keep for Your Records Be sure you have read the Exception above to see if you must fill in Form 6251 instead of using this worksheet. If you are claiming the foreign tax credit (see the instructions for Form 1040, line 46, on page 36), enter that credit on line 46. 1. Are you filing Schedule A? No. Skip lines 1 through 3; enter the amount from Form 1040, line 37, on line 4, and go to line 5. Yes. Enter the amount from Form 1040, line 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Enter the smaller of the amount on Schedule A, line 4, or 2.5% (.025) of the amount on Form 1040, line 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Enter the total of the amounts from Schedule A, lines 9 and 26 . . . . . . . . . . . . . . . . . . . . . . 4. Add lines 1 through 3 above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Enter the amount shown below for your filing status. • Single or head of household —$40,250 • Married filing jointly or qualifying widow(er) —$58,000 ..................... • Married filing separately —$29,000 6. Is the amount on line 4 more than the amount on line 5? No. STOP You do not need to fill in Form 6251. } . 1. . 2. . 3. . 4. . 5. Yes. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Enter the amount shown below for your filing status. • Single or head of household —$112,500 • Married filing jointly or qualifying widow(er) —$150,000 ...................... • Married filing separately —$75,000 8. Is the amount on line 4 more than the amount on line 7? No. Skip lines 8 and 9; enter the amount from line 6 on line 10, and go to line 11. Yes. Subtract line 7 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Multiply line 8 by 25% (.25) and enter the result but do not enter more than line 5 above . . . . 10. Add lines 6 and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Is the amount on line 10 more than $175,000 ($87,500 if married filing separately)? Yes. STOP Fill in Form 6251 to see if you owe the alternative minimum tax. } 6. 7. 8. 9. 10. No. Multiply line 10 by 26% (.26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 12. Enter the amount from Form 1040, line 43, minus the total of any tax from Form 4972 and any amount on Form 1040, line 46. If you used Schedule J to figure your tax, the amounts for lines 43 and 46 of Form 1040 must be refigured without using Schedule J . . . . . . . . . . . . . . . 12. Next. Is the amount on line 11 more than the amount on line 12? Yes.Fill in Form 6251 to see if you owe the alternative minimum tax. No. You do not need to fill in Form 6251. - 35 - Need more information or forms? See page 7. Page 36 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 44 Through 50 Form 6251 should be filled in for a child who was under age 14 at the end of 2004 if the CAUTION child’s adjusted gross income from Form 1040, line 37, exceeds the child’s earned income by more than $5,750. ! Line 46 Line 47 Credit for Child and Dependent Care Expenses You may be able to take this credit if you paid someone to care for your child under age 13 or your dependent or spouse who could not care for himself or herself. For details, use TeleTax topic 602 (see page 8) or see Form 2441. Foreign Tax Credit If you paid income tax to a foreign country, you may be able to take this credit. Generally, you must complete and attach Form 1116 to do so. Exception. You do not have to complete Form 1116 to take this credit if all five of the following apply. 1. All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). 2. If you had dividend income from shares of stock, you held those shares for at least 16 days. 3. You are not filing Form 4563 or excluding income from sources within Puerto Rico. 4. The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). 5. All of your foreign taxes were: a. Legally owed and not eligible for a refund, and b. Paid to countries that are recognized by the United States and do not support terrorism. For more details on these requirements, see the Instructions for Form 1116. Do you meet all five requirements above? 䡺 Yes. Enter on line 46 the smaller of (a) your total foreign taxes, or (b) the amount on Form 1040, line 43. 䡺 No. See Form 1116 to find out if you can take the credit and, if you can, if you have to file Form 1116. • The amount on Form 1040, line 37, is $52,000 or more ($105,000 or more if married filing jointly). • You are taking a deduction for tuition and fees on Form 1040, line 27, for the same student. • You (or your spouse) were a nonresident alien for any part of 2004 unless your filing status is married filing jointly. Line 50 Line 48 Credit for the Elderly or the Disabled You may be able to take this credit if by the end of 2004 (a) you were age 65 or older, or (b) you retired on permanent and total disability and you had taxable disability income. But you usually cannot take the credit if the amount on Form 1040, line 37, is $17,500 or more ($20,000 or more if married filing jointly and only one spouse is eligible for the credit; $25,000 or more if married filing jointly and both spouses are eligible; $12,500 or more if married filing separately). See Schedule R and its instructions for details. Credit figured by the IRS. If you can take this credit and you want us to figure it for you, see the Instructions for Schedule R. Line 49 Education Credits If you (or your dependent) paid qualified expenses in 2004 for yourself, your spouse, or your dependent to enroll in or attend an eligible educational institution, you may be able to take an education credit. See Form 8863 for details. However, you cannot take an education credit if any of the following apply. • You are claimed as a dependent on someone’s (such as your parent’s) 2004 tax return. • Your filing status is married filing separately. Need more information or forms? See page 7. - 36 - Retirement Savings Contributions Credit You may be able to take this credit if you, or your spouse if filing jointly, made (a) contributions to a traditional or Roth IRA; (b) elective deferrals to a 401(k), 403(b), governmental 457, SEP, or SIMPLE plan; (c) voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan); or (d) contributions to a 501(c)(18)(D) plan. However, you cannot take the credit if either of the following applies. 1. The amount on Form 1040, line 37, is more than $25,000 ($37,500 if head of household; $50,000 if married filing jointly). 2. The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1987, (b) is claimed as a dependent on someone else’s 2004 tax return, or (c) was a student (defined below). You were a student if during any 5 months of 2004 you: • Were enrolled as a full-time student at a school, or • Took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or night school. For more details, use TeleTax topic 610 (see page 8) or see Form 8880. Page 37 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 51 Line 51—Child Tax Credit Questions Pub. 972 Who Must Use Pub. 972 What Is the Child Tax Credit? This credit is for people who have a qualifying child (defined below). It is in addition to the credit for child and dependent care expenses on Form 1040, line 47, and the earned income credit on Form 1040, line 65a. Three Steps To Take the Child Tax Credit! Step 1. Step 2. Step 3. Make sure you have a qualifying child for the child tax credit (defined below). Make sure you checked the box on Form 1040, line 6c, column (4), for each qualifying child. Answer the questions on this page to see if you may use the worksheet on page 38 to figure your credit or if you must use Pub. 972, Child Tax Credit. If you need Pub. 972, see page 7. 1. Are you excluding income from Puerto Rico or are you filing any of the following forms? • Form 2555 or 2555-EZ (relating to foreign earned income). • Form 4563 (exclusion of income for residents of American Samoa). No. Continue No. Continue CAUTION Yes. 䊲 A qualifying child for purposes of the child tax credit is a child who: 1. Is claimed as your dependent on line 6c, 2. Was under age 17 at the end of 2004, 3. Is your (a) son, daughter, adopted child, stepchild, or a descendant of any of them (for example, your grandchild); (b) brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew), whom you cared for as you would your own child; or (c) foster child (any child placed with you by an authorized placement agency whom you cared for as you would your own child), and 4. Is a U.S. citizen or resident alien. STOP You must use Pub. 972 to figure your credit. 2. Is the amount on Form 1040, line 37, more than the amount shown below for your filing status? • Married filing jointly – $110,000 • Single, head of household, or qualifying widow(er) – $75,000 • Married filing separately – $55,000 Qualifying Child for Child Tax Credit ! Yes. 䊲 STOP You must use Pub. 972 to figure your credit. 3. Are you claiming any of the following credits? • Adoption credit, Form 8839 (see the instructions for Form 1040, line 52, on page 39). • Mortgage interest credit, Form 8396 (see the instructions for Form 1040, line 53, on page 39). • District of Columbia first-time homebuyer credit, Form 8859. The above requirements are not the same as the requirements to be a qualifying child for the earned income credit. An adopted child is always treated as your own child. An adopted child includes a child placed with you by an authorized placement agency for legal adoption even if the adoption is not final. An authorized placement agency includes any person or court authorized by state law to place children for legal adoption. - 37 - No. Use the worksheet on page 38 to figure your child tax credit. Yes. You must use Pub. 972 to figure your child tax credit. You will also need the form(s) listed above for any credit(s) you are claiming. Need more information or forms? See page 7. Page 38 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 51 Child Tax Credit Worksheet—Line 51 Keep for Your Records ● To be a qualifying child for the child tax credit, the child must be under age 17 at the end of 2004 and meet the other requirements listed on page 37. CAUTION ● Do not use this worksheet if you answered “Yes” to question 1, 2, or 3 on page 37. Instead, use Pub. 972. ⫻ $1,000. 1. Number of qualifying children: Enter the result. 2. Enter the amount from Form 1040, line 45. 3. Add the amounts from Form 1040: 1 2 Line 46 4. Line 47 + Line 48 + Line 49 + Line 50 + Enter the total. 3 Are the amounts on lines 2 and 3 the same? Yes. STOP You cannot take this credit because there is no tax to reduce. However, you may be able to take the additional child tax credit. See the TIP below. 4 No. Subtract line 3 from line 2. 5. Is the amount on line 1 more than the amount on line 4? Yes. Enter the amount from line 4. Also, you may be able to take the additional child tax credit. See the TIP below. No. Enter the amount from line 1. TIP 其 This is your child tax credit. You may be able to take the additional child tax credit on Form 1040, line 67, if you answered “Yes” on line 4 or line 5 above. ● First, complete your Form 1040 through line 66. ● Then, use Form 8812 to figure any additional child tax credit. Need more information or forms? See page 7. - 38 - 5 Enter this amount on Form 1040, line 51. 1040 䊴 Page 39 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 52 Through 61 Line 52 Adoption Credit You may be able to take this credit if either of the following applies. • You paid expenses to adopt a child. • You adopted a child with special needs and the adoption became final in 2004. See the Instructions for Form 8839 for details. Line 53 ured the credit. Check box c and enter “FNS” on the line to the right of box c. • Qualified zone academy bond credit. This credit applies only to S corporation shareholders. See Form 8860. Other Taxes Line 58 Social Security and Medicare Tax on Tip Income Not Reported to Employer Include the following credits on line 53 and check the appropriate box(es). To find out if you can take the credit, see the form indicated. • Mortgage interest credit. If a state or local government gave you a mortgage credit certificate, see Form 8396. • District of Columbia first-time homebuyer credit. See Form 8859. If you received tips of $20 or more in any month and you did not report the full amount to your employer, you must pay the social security and Medicare or railroad retirement (RRTA) tax on the unreported tips. You must also pay this tax if your Form(s) W-2 shows allocated tips that you are including in your income on Form 1040, line 7. Line 54 To figure the social security and Medicare tax, use Form 4137. If you owe RRTA tax, contact your employer. Your employer will figure and collect the RRTA tax. Other Credits Include the following credits on line 54 and check the appropriate box(es). If box c is checked, also enter the form number, if applicable. To find out if you can take the credit, see the form or publication indicated. • Credit for prior year minimum tax. If you paid alternative minimum tax in a prior year, see Form 8801. • Qualified electric vehicle credit. If you placed a new electric vehicle in service in 2004, see Form 8834. • General business credit. This credit consists of a number of credits that usually apply only to individuals who are partners, shareholders in an S corporation, self-employed, or who have rental property. See Form 3800 or Pub. 334. • Empowerment zone and renewal community employment credit. See Form 8844. • New York Liberty Zone business employee credit. See Form 8884. • Nonconventional source fuel credit. If you sold fuel produced from a nonconventional source, or you were an owner of royalty interests and you received income from the sale of fuel produced from a nonconventional source, you may be able to take this credit. See Internal Revenue Code section 29 and, if an owner of royalty interests, Rev. Proc. 2004-27, 2004-17 I.R.B. 831. You can find Rev. Proc. 2004-27 on page 831 of Internal Revenue Bulletin 2004-17 at www.irs.gov/pub/irs-irbs/irb04-17.pdf. Attach a schedule showing how you fig- You may be charged a penalty equal to 50% of the social security and Medicare tax due on CAUTION tips you received but did not report to your employer. ! Exception. If only item 1 applies to you and distribution code 1 is correctly shown in Form 1099-R, box 7, you do not have to file Form 5329. Instead, multiply the taxable amount of the distribution by 10% (.10) and enter the result on line 59. The taxable amount of the distribution is the part of the distribution you reported on Form 1040, line 15b or line 16b, or on Form 4972. Also, put “No” under the heading “Other Taxes” to the left of line 59 to indicate that you do not have to file Form 5329. But if distribution code 1 is incorrectly shown in Form 1099-R, box 7, or you qualify for an exception for qualified medical expenses, qualified higher education expenses, or qualified first-time homebuyer distributions, you must file Form 5329. Line 60 Advance Earned Income Credit Payments Enter the total amount of advance earned income credit (EIC) payments you received. These payments are shown in Form(s) W-2, box 9. Line 61 Household Employment Taxes If any of the following apply, see Schedule H and its instructions to find out if you owe these taxes. Line 59 Additional Tax on IRAs, Other Qualified Retirement Plans, etc. If any of the following apply, see Form 5329 and its instructions to find out if you owe this tax and if you must file Form 5329. 1. You received an early distribution from (a) an IRA or other qualified retirement plan, (b) an annuity, or (c) a modified endowment contract entered into after June 20, 1988, and the total distribution was not rolled over in a qualified rollover contribution. 2. Excess contributions were made to your IRAs, Coverdell education savings accounts (ESAs), Archer MSAs, or health savings accounts. 3. You received taxable distributions from Coverdell ESAs or qualified tuition programs. 4. You were born before July 1, 1933, and did not take the minimum required distribution from your IRA or other qualified retirement plan. - 39 - 1. You paid any one household employee (defined below) cash wages of $1,400 or more in 2004. Cash wages include wages paid by check, money order, etc. 2. You withheld federal income tax during 2004 at the request of any household employee. 3. You paid total cash wages of $1,000 or more in any calendar quarter of 2003 or 2004 to household employees. TIP For item (1), do not count amounts paid to an employee who was under age 18 at any time in 2004 and was a student. Household employee. Any person who does household work is a household employee if you can control what will be done and how it will be done. Household work includes work done in or around your home by babysitters, nannies, health aides, maids, yard workers, and similar domestic workers. Need more information or forms? See page 7. Page 40 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 62 Through 64 Line 62 Total Tax Include in the total on line 62 any of the following taxes. To find out if you owe the tax, see the form or publication indicated. On the dotted line next to line 62, enter the amount of the tax and identify it as indicated. 1. Additional tax on health savings account distributions (see Form 8889). Identify as “HSA.” 2. Additional tax on Archer MSA distributions (see Form 8853). Identify as “MSA.” 3. Additional tax on Medicare Advantage MSA distributions (see Form 8853). Identify as “Med MSA.” 4. Recapture of the following credits. a. Investment credit (see Form 4255). Identify as “ICR.” b. Low-income housing credit (see Form 8611). Identify as “LIHCR.” c. Qualified electric vehicle credit (see Pub. 535). Identify as “QEVCR.” d. Indian employment credit (see Form 8845). Identify as “IECR.” e. New markets credit (see Form 8874). Identify as “NMCR.” f. Credit for employer-provided child care facilities (see Form 8882). Identify as “ECCFR.” 5. Recapture of federal mortgage subsidy. If you sold your home in 2004 and it was financed (in whole or in part) from the proceeds of any tax-exempt qualified mortgage bond or you claimed the mortgage interest credit, see Form 8828. Identify as “FMSR.” 6. Section 72(m)(5) excess benefits tax (see Pub. 560). Identify as ‘‘Sec. 72(m)(5).’’ 7. Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. This tax should be shown in Form W-2, box 12, with codes A and B or M and N. Identify as “UT.” 8. Golden parachute payments. If you received an excess parachute payment (EPP), you must pay a 20% tax on it. This tax should be shown in Form W-2, box 12, with code K. If you received a Form 1099-MISC, the tax is 20% of the EPP shown in box 13. Identify as “EPP.” 9. Tax on accumulation distribution of trusts (see Form 4970). Identify as “ADT.” 10. Excise tax on insider stock compensation from an expatriated corporation. You may owe a 15% excise tax on the value of nonstatutory stock options and certain other stock-based compensation held by you or a member of your family from an expatriated corporation or its expanded affiliated group in which you were an officer, director, or more-than-10% owner. See Internal Revenue Code section 4985. Identify as “ISC.” Payments Line 63 Federal Income Tax Withheld Add the amounts shown as federal income tax withheld on your Forms W-2, W-2G, and 1099-R. Enter the total on line 63. The amount withheld should be shown in Form W-2 or W-2G, box 2, and in Form 1099-R, box 4. Attach Forms W-2G and 1099-R to the front of your return if federal income tax was withheld. If you received a 2004 Form 1099 showing federal income tax withheld on dividends, interest income, unemployment compensation, social security benefits, or other income you received, include the amount withheld in the total on line 63. This should be shown in Form 1099, box 4, or Form SSA-1099, box 6. Need more information or forms? See page 7. - 40 - Line 64 2004 Estimated Tax Payments Enter any estimated federal income tax payments you made using Form 1040-ES for 2004. Include any overpayment from your 2003 return that you applied to your 2004 estimated tax. If you and your spouse paid joint estimated tax but are now filing separate income tax returns, you can divide the amount paid in any way you choose as long as you both agree. If you cannot agree, you must divide the payments in proportion to each spouse’s individual tax as shown on your separate returns for 2004. For an example of how to do this, see Pub. 505. Be sure to show both social security numbers (SSNs) in the space provided on the separate returns. If you or your spouse paid separate estimated tax but you are now filing a joint return, add the amounts you each paid. Follow these instructions even if your spouse died in 2004 or in 2005 before filing a 2004 return. Divorced Taxpayers If you got divorced in 2004 and you made joint estimated tax payments with your former spouse, put your former spouse’s SSN in the space provided on the front of Form 1040. If you were divorced and remarried in 2004, put your present spouse’s SSN in the space provided on the front of Form 1040. Also, under the heading Payments to the left of line 64, put your former spouse’s SSN, followed by “DIV.” Name Change If you changed your name because of marriage, divorce, etc., and you made estimated tax payments using your former name, attach a statement to the front of Form 1040. On the statement, explain all the payments you and your spouse made in 2004 and the name(s) and SSN(s) under which you made them. Page 41 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Lines 65a and 65b— Earned Income Credit (EIC) Step 2 Investment Income 1. Add the amounts from Form 1040: What Is the EIC? Line Line Line Line The EIC is a credit for certain people who work. The credit may give you a refund even if you do not owe any tax. To Take the EIC: • Follow the steps below. • Complete the worksheet that applies to you or let the IRS 8a 8b 9a 13* + + + figure the credit for you. • If you have a qualifying child, complete and attach Investment Income = Schedule EIC. If you take the EIC even though you are not eligible and it is determined that your error is due to reckless or intentional disregard of the EIC rules, you will not be CAUTION allowed to take the credit for 2 years even if you are otherwise eligible to do so. If you fraudulently take the EIC, you will not be allowed to take the credit for 10 years. See Form 8862, Who must file, on page 44. You may also have to pay penalties. ! Step 1 *Do not include if line 13 is a loss. 2. Is your investment income more than $2,650? Yes. Continue 䊲 3. Are you filing Form 4797 (relating to sales of business property)? Yes. See Form 4797 filers on page 44. All Filers 1. If, in 2004: • 2 children lived with you, is the amount on Form 1040, line 37, less than $34,458 ($35,458 if married filing jointly)? • 1 child lived with you, is the amount on Form 1040, line 37, less than $30,338 ($31,338 if married filing jointly)? • No children lived with you, is the amount on Form 1040, line 37, less than $11,490 ($12,490 if married filing jointly)? Yes. Continue No. 䊲 Yes. You must use Worksheet 1 in Pub. 596 to see if you can take the credit. To get Pub. 596, see page 7. STOP You cannot take the credit. No. 䊲 No. STOP You cannot take the credit. 4. Do any of the following apply for 2004? • You are filing Schedule E. • You are reporting income or a loss from the rental of personal property not used in a trade or business. • You are reporting income on Form 1040, line 21, from Form 8814 (relating to election to report child’s interest and dividends). 2. Do you, and your spouse if filing a joint return, have a social security number that allows you to work or is valid for EIC purposes (see page 44)? Yes. Continue No. Skip question 3; go to question 4. No. Continue 䊲 5. Did a child live with you in 2004? STOP You cannot take the credit. Put “No” on the dotted line next to line 65a. Yes. Go to Step 3 on page 42. No. Go to Step 4 on page 42. 3. Is your filing status married filing separately? Yes. STOP No. Continue 䊲 You cannot take the credit. 4. Are you filing Form 2555 or 2555-EZ (relating to foreign earned income)? Yes. STOP You cannot take the credit. No. Continue 䊲 5. Were you a nonresident alien for any part of 2004? Yes. See Nonresident aliens on page 44. No. Go to Step 2. - 41 - Need more information or forms? See page 7. Page 42 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Continued from page 41 Step 3 2. Do you have at least one child who meets the conditions to be your qualifying child? Qualifying Child Yes. Continue 䊲 No. Skip the next two questions; go to Step 4, question 2. A qualifying child is a child who is your... Son, daughter, adopted child, stepchild, or a descendant of any of them (for example, your grandchild) or Brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew), whom you cared for as you would your own child or Foster child (any child placed with you by an authorized placement agency whom you cared for as you would your own child) 3. Does the child meet the conditions to be a qualifying child of any other person (other than your spouse if filing a joint return) for 2004? Yes. See Qualifying child of more than one person on page 44. AND Step 4 Under age 19 Yes. Under age 24 and a student (see page 44) or Any age and permanently and totally disabled (see page 44) AND Yes. No. Continue STOP 䊲 You cannot take the credit. Lived with you in the United States for more than half of 2004. If the child did not live with you for the required time, see Exception to “time lived with you” condition on page 44. 3. Were you, or your spouse if filing a joint return, at least age 25 but under age 65 at the end of 2004? Yes. Continue STOP You cannot take the credit. 4. Was your home, and your spouse’s if filing a joint return, in the United States for more than half of 2004? Members of the military stationed outside the United States, see page 44 before you answer. 1. Look at the qualifying child conditions above. Could you, or your spouse if filing a joint return, be a qualifying child of another person in 2004? No. Go to question 2. You cannot take the credit. Put “No” on the dotted line next to line 65a. Need more information or forms? See page 7. No. 䊲 If the child was married, see page 44. STOP 䊲 2. Can you, or your spouse if filing a joint return, be claimed as a dependent on someone else’s 2004 tax return? who... Yes. No. Continue STOP You cannot take the credit. Put “No” on the dotted line next to line 65a. or ! Filers Without a Qualifying Child 1. Look at the qualifying child conditions in Step 3. Could you, or your spouse if filing a joint return, be a qualifying child of another person in 2004? was at the end of 2004... CAUTION No. This child is your qualifying child. The child must have a valid social security number as defined on page 44 unless the child was born and died in 2004. Skip Step 4; go to Step 5 on page 43. - 42 - Yes. Go to Step 5 on page 43. No. STOP You cannot take the credit. Put “No” on the dotted line next to line 65a. Page 43 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Continued from page 42 Step 5 Earned Income 1. Are you filing Schedule SE because you were a member of the clergy or you had church employee income of $108.28 or more? Yes. See Clergy or Church employees, whichever applies, on this page. 䊲 • Subtract, if included on line 7, any: Taxable scholarship or fellowship grant not reported on a Form W-2. Amount paid to an inmate in a penal institution for work (put “PRI” and the amount subtracted on the dotted line next to Form 1040, line 7). Amount received as a pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan (put “DFC” and the amount subtracted on the dotted line next to Form 1040, line 7). This amount may be shown in Form W-2, box 11. If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. } No. Continue 䊲 4. If you have: • 2 or more qualifying children, is your earned income less than $34,458 ($35,458 if married filing jointly)? • 1 qualifying child, is your earned income less than $30,338 ($31,338 if married filing jointly)? • No qualifying children, is your earned income less than $11,490 ($12,490 if married filing jointly)? Form 1040, line 7 • Yes. Skip question 4 and Step 6; go to Worksheet B on page 46. No. Continue 2. Figure earned income: • 3. Were you self-employed, or are you filing Schedule SE because you were a member of the clergy or you had church employee income, or are you filing Schedule C or C-EZ as a statutory employee? Yes. Go to Step 6. No. STOP You cannot take the credit. Step 6 – Add all of your nontaxable combat pay if you elect to include it in earned income.* Also enter this amount on Form 1040, line 65b. See Combat pay, Nontaxable on this page. + ! Electing to include nontaxable combat pay may increase or decrease your EIC. Figure the credit with and without your nontaxable combat pay before making the election. CAUTION How To Figure the Credit 1. Do you want the IRS to figure the credit for you? Yes. See Credit figured by the IRS on page 44. No. Go to Worksheet A on page 45. Definitions and Special Rules (listed in alphabetical order) Adopted child. An adopted child is always treated as your own child. An adopted child includes a child placed with you by an authorized placement agency for legal adoption even if the adoption is not final. An authorized placement agency includes any person or court authorized by state law to place children for legal adoption. Church employees. Determine how much of the amount on Form 1040, line 7, was also reported on Schedule SE, line 5a. Subtract that amount from the amount on Form 1040, line 7, and enter the result in the first space of Step 5, line 2. Be sure to answer “Yes” to question 3 in Step 5. Clergy. The following instructions apply to ministers, members of religious orders who have not taken a vow of poverty, and Christian Science practitioners. If you are filing Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on Form 1040, line 7: 1. Put “Clergy” on the dotted line next to Form 1040, line 65a. 2. Determine how much of the amount on Form 1040, line 7, was also reported on Schedule SE, line 2. 3. Subtract that amount from the amount on Form 1040, line 7. Enter the result in the first space of Step 5, line 2. 4. Be sure to answer “Yes” to question 3 in Step 5. Earned Income = * The election cannot be made on the return of a taxpayer whose tax year ended before October 5, 2004, due to his or her death. Combat pay, Nontaxable. If you were a member of the U.S. Armed Forces who served in a combat zone, certain pay is excluded from your income. See Combat Zone Exclusion in Pub. 3. You can elect to include this pay in your earned income when figuring the EIC. The amount of your nontaxable combat pay should be shown in Form(s) W-2, box 14, with code Q. - 43 - Need more information or forms? See page 7. Page 44 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Credit figured by the IRS. To have the IRS figure the credit for you: 1. Put “EIC” on the dotted line next to Form 1040, line 65a. 2. Be sure you enter the nontaxable combat pay you elect to include in earned income on Form 1040, line 65b. See Combat pay, Nontaxable on page 43. 3. If you have a qualifying child, complete and attach Schedule EIC. If your EIC for a year after 1996 was reduced or disallowed, see Form 8862, Who must file below. Exception to “time lived with you” condition. A child is considered to have lived with you for all of 2004 if the child was born or died in 2004 and your home was this child’s home for the entire time he or she was alive in 2004. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or detention in a juvenile facility, count as time lived at home. If your child is presumed to have been kidnapped by someone who is not a family member, see Pub. 596 to find out if that child is a qualifying child for the EIC. To get Pub. 596, see page 7. If you were in the military stationed outside the United States, see Members of the military below. Form 4797 filers. If the amount on Form 1040, line 13, includes an amount from Form 4797, you must use Worksheet 1 in Pub. 596 to see if you can take the EIC. To get Pub. 596, see page 7. Otherwise, stop; you cannot take the EIC. Form 8862, Who must file. You must file Form 8862 if your EIC for a year after 1996 was reduced or disallowed for any reason other than a math or clerical error. But do not file Form 8862 if either of the following applies. 1. After your EIC was reduced or disallowed in an earlier year (a) you filed Form 8862 (or other documents) and your EIC was then allowed, and (b) your EIC has not been reduced or disallowed again for any reason other than a math or clerical error. 2. You are taking the EIC without a qualifying child and the only reason your EIC was reduced or disallowed in the earlier year was because it was determined that a child listed on Schedule EIC was not your qualifying child. Also, do not file Form 8862 or take the credit for the: • 2 years after the most recent tax year for which there was a • final determination that your EIC was reduced or disallowed due to reckless or intentional disregard of the EIC rules, or 10 years after the most recent tax year for which there was a final determination that your EIC was reduced or disallowed due to fraud. Married child. A child who was married at the end of 2004 is a qualifying child only if (a) you can claim him or her as your dependent on Form 1040, line 6c, or (b) this child’s other parent claims him or her as a dependent under the rules for children of divorced or separated parents in Pub. 501. Members of the military. If you were on extended active duty outside the United States, your home is considered to be in the United States during that duty period. Extended active duty is military duty ordered for an indefinite period or for a period of more than 90 days. Once you begin serving extended active duty, you are considered to be on extended active duty even if you serve fewer than 90 days. Nonresident aliens. If your filing status is married filing jointly, go to Step 2 on page 41. Otherwise, stop; you cannot take the EIC. mental condition and a doctor has determined that this condition (a) has lasted or can be expected to last continuously for at least a year, or (b) can lead to death. Qualifying child of more than one person. If the child meets the conditions to be a qualifying child of more than one person, only one person can take the EIC based on that child. The other person(s) cannot take the EIC for people without a qualifying child, but may be able to take the EIC based on a different qualifying child. If you and the other person(s) cannot agree who will take the EIC based on the same child, the IRS will apply the following rules. • If only one of the persons is the child’s parent, the child will be treated as the qualifying child of the parent. • If both persons are the child’s parents, the child will be treated as the qualifying child of the parent with whom the child lived for the longer period of time during 2004. If the child lived with each parent for the same amount of time, the child will be treated as the qualifying child of the parent who had the higher adjusted gross income (AGI) for 2004. • If none of the persons is the child’s parent, the child will be treated as the qualifying child of the person who had the highest AGI for 2004. The child must have a valid social security number as defined below unless the child was born and died in 2004. If you do not have a qualifying child, stop; you cannot take the EIC. Put “No” on the dotted line next to line 65a. If you have a qualifying child, skip Step 4; go to Step 5 on page 43. Example. You and your 5-year-old daughter moved in with your mother in April 2004. You are not a qualifying child of your mother. Your daughter meets the conditions to be a qualifying child for both you and your mother. If you and your mother cannot agree on who will treat your daughter as a qualifying child, the rules above apply. Under these rules, you are entitled to treat your daughter as a qualifying child because you are the child’s parent. Your mother would not be entitled to take the EIC unless she has a different qualifying child. Social security number (SSN). For purposes of taking the EIC, a valid SSN is a number issued by the Social Security Administration unless “Not Valid for Employment” is printed on the social security card and the number was issued solely to apply for or receive a federally funded benefit. To find out how to get an SSN, see page 16. If you will not have an SSN by April 15, 2005, see What If You Cannot File on Time? on page 12. Student. A child who during any 5 months of 2004: • Was enrolled as a full-time student at a school, or • Took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or night school. Welfare benefits, Effect of credit on. Any refund you receive as a result of taking the EIC will not be used to determine if you are eligible for the following programs or how much you can receive from them. But if the refund you receive because of the EIC is not spent within a certain period of time, it may count as an asset (or resource) and affect your eligibility. • Temporary Assistance for Needy Families (TANF). • Medicaid and supplemental security income (SSI). • Food stamps and low-income housing. Permanently and totally disabled child. A child who cannot engage in any substantial gainful activity because of a physical or Need more information or forms? See page 7. - 44 - Page 45 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Worksheet A—Earned Income Credit (EIC)—Lines 65a and 65b Keep for Your Records Before you begin: ⻫ Be sure you are using the correct worksheet. Do not use this worksheet if you were self-employed, or you are filing Schedule SE because you were a member of the clergy or you had church employee income, or you are filing Schedule C or C-EZ as a statutory employee. Instead, use Worksheet B that begins on page 46. Part 1 All Filers Using Worksheet A 1 1. Enter your earned income from Step 5 on page 43. 2. Look up the amount on line 1 above in the EIC Table on pages 48–53 to find the credit. Be sure you use the correct column for your filing status and the number of children you have. Enter the credit here. 2 STOP If line 2 is zero, You cannot take the credit. Put “No” on the dotted line next to line 65a. 3. Enter the amount from Form 1040, line 37. 4. Are the amounts on lines 3 and 1 the same? 3 Yes. Skip line 5; enter the amount from line 2 on line 6. No. Go to line 5. 5. Part 2 Filers Who Answered “No” on Line 4 Part 3 If you have: ● No qualifying children, is the amount on line 3 less than $6,400 ($7,400 if married filing jointly)? ● 1 or more qualifying children, is the amount on line 3 less than $14,050 ($15,050 if married filing jointly)? Yes. Leave line 5 blank; enter the amount from line 2 on line 6. No. Look up the amount on line 3 in the EIC Table on pages 48–53 to find the credit. Be sure you use the correct column for your filing status and the number of children you have. Enter the credit here. Look at the amounts on lines 5 and 2. Then, enter the smaller amount on line 6. 6. 5 This is your earned income credit. 6 Enter this amount on Form 1040, line 65a. Your Earned Income Credit Reminder— ⻫ If you have a qualifying child, complete and attach Schedule EIC. 1040 䊴 1040 䊴 EIC CAUTION If your EIC for a year after 1996 was reduced or disallowed, see page 44 to find out if you must file Form 8862 to take the credit for 2004. - 45 - Need more information or forms? See page 7. Page 46 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Worksheet B—Earned Income Credit (EIC)—Lines 65a and 65b Keep for Your Records Use this worksheet if you were self-employed, or you are filing Schedule SE because you were a member of the clergy or you had church employee income, or you are filing Schedule C or C-EZ as a statutory employee. ⻫ Complete the parts below (Parts 1 through 3) that apply to you. Then, continue to Part 4. ⻫ If you are married filing a joint return, include your spouse’s amounts, if any, with yours to figure the amounts to enter in Parts 1 through 3. Part 1 Self-Employed, Members of the Clergy, and People With Church Employee Income Filing Schedule SE Part 2 Self-Employed NOT Required To File Schedule SE For example, your net earnings from self-employment were less than $400. 1a. Enter the amount from Schedule SE, Section A, line 3, or Section B, line 3, whichever applies. 1a b. Enter any amount from Schedule SE, Section B, line 4b, and line 5a. + 1b c. Combine lines 1a and 1b. = 1c d. Enter the amount from Schedule SE, Section A, line 6, or Section B, line 13, whichever applies. – 1d e. Subtract line 1d from 1c. = 1e 2. Do not include on these lines any statutory employee income or any amount exempt from self-employment tax as the result of the filing and approval of Form 4029 or Form 4361. a. Enter any net farm profit or (loss) from Schedule F, line 36, and from farm partnerships, Schedule K-1 (Form 1065), box 14, code A*. 2a b. Enter any net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9*. + 2b c. Combine lines 2a and 2b. = 2c *Reduce any Schedule K-1 amounts by any partnership section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties. If you have any Schedule K-1 amounts, complete the appropriate line(s) of Schedule SE, Section A. Put your name and social security number on Schedule SE and attach it to your return. Part 3 Statutory Employees Filing Schedule C or C-EZ Part 4 All Filers Using Worksheet B Note. If line 4b includes income on which you should have paid selfemployment tax but did not, we may reduce your credit by the amount of self-employment tax not paid. 3. Enter the amount from Schedule C, line 1, or Schedule C-EZ, line 1, that you are filing as a statutory employee. 4a. Enter your earned income from Step 5 on page 43. b. Combine lines 1e, 2c, 3, and 4a. This is your total earned income. If line 4b is zero or less, 5. If ● ● ● STOP 3 4a 4b You cannot take the credit. Put “No” on the dotted line next to line 65a. you have: 2 or more qualifying children, is line 4b less than $34,458 ($35,458 if married filing jointly)? 1 qualifying child, is line 4b less than $30,338 ($31,338 if married filing jointly)? No qualifying children, is line 4b less than $11,490 ($12,490 if married filing jointly)? Yes. If you want the IRS to figure your credit, see page 44. If you want to figure the credit yourself, enter the amount from line 4b on line 6 (page 47). No. STOP You cannot take the credit. Put “No” on the dotted line next to line 65a. Need more information or forms? See page 7. - 46 - Page 47 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 65a and 65b Worksheet B—Continued from page 46 Part 5 All Filers Using Worksheet B Keep for Your Records 6. Enter your total earned income from Part 4, line 4b, on page 46. 7. Look up the amount on line 6 above in the EIC Table on pages 48–53 to find the credit. Be sure you use the correct column for your filing status and the number of children you have. Enter the credit here. 6 7 If line 7 is zero, STOP You cannot take the credit. Put “No” on the dotted line next to line 65a. 8. Enter the amount from Form 1040, line 37. 9. Are the amounts on lines 8 and 6 the same? 8 Yes. Skip line 10; enter the amount from line 7 on line 11. No. Go to line 10. Part 6 10. Filers Who Answered “No” on Line 9 If you have: ● No qualifying children, is the amount on line 8 less than $6,400 ($7,400 if married filing jointly)? ● 1 or more qualifying children, is the amount on line 8 less than $14,050 ($15,050 if married filing jointly)? Yes. Leave line 10 blank; enter the amount from line 7 on line 11. No. Look up the amount on line 8 in the EIC Table on pages 48–53 to find the credit. Be sure you use the correct column for your filing status and the number of children you have. Enter the credit here. Look at the amounts on lines 10 and 7. Then, enter the smaller amount on line 11. Part 7 Your Earned Income Credit 11. 10 This is your earned income credit. 11 Enter this amount on Form 1040, line 65a. Reminder— ⻫ If you have a qualifying child, complete and attach Schedule EIC. 1040 䊴 EIC CAUTION 1040 䊴 If your EIC for a year after 1996 was reduced or disallowed, see page 44 to find out if you must file Form 8862 to take the credit for 2004. - 47 - Need more information or forms? See page 7. Page 48 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Earned Income Credit (EIC) Table Caution. This is not a tax table. And your filing status is— If the amount you are looking up from the worksheet is— No children 1. To find your credit, read 2. Then, go to the column Example. If your filing down the “At least – But less than” columns and find the line that includes the amount you were told to look up from your EIC Worksheet. that includes your filing status and the number of qualifying children you have. Enter the credit from that column on your EIC Worksheet. status is single, you have one qualifying child, and the amount you are looking up from your EIC Worksheet is $2,455, you would enter $842. At least But less than 2,400 2,450 And your filing status is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children At least But less than One child Your credit is— 2,450 2,500 One child Two children Your credit is— 186 189 825 842 970 990 And your filing status is— Married filing jointly and you have— Two No children children Single, head of household, or qualifying widow(er) and you have— One child If the amount you are looking up from the worksheet is— Two children Your credit is— Single, head of household, or qualifying widow(er) and you have— No children At least But less than One child Married filing jointly and you have— Two No children children Your credit is— One child Two children Your credit is— $1 50 100 150 200 $50 100 150 200 250 $2 6 10 13 17 $9 26 43 60 77 $10 30 50 70 90 $2 6 10 13 17 $9 26 43 60 77 $10 30 50 70 90 2,750 2,800 2,850 2,900 2,950 2,800 2,850 2,900 2,950 3,000 212 216 220 224 228 944 961 978 995 1,012 1,110 1,130 1,150 1,170 1,190 212 216 220 224 228 944 961 978 995 1,012 1,110 1,130 1,150 1,170 1,190 250 300 350 400 450 300 350 400 450 500 21 25 29 33 36 94 111 128 145 162 110 130 150 170 190 21 25 29 33 36 94 111 128 145 162 110 130 150 170 190 3,000 3,050 3,100 3,150 3,200 3,050 3,100 3,150 3,200 3,250 231 235 239 243 247 1,029 1,046 1,063 1,080 1,097 1,210 1,230 1,250 1,270 1,290 231 235 239 243 247 1,029 1,046 1,063 1,080 1,097 1,210 1,230 1,250 1,270 1,290 500 550 600 650 700 550 600 650 700 750 40 44 48 52 55 179 196 213 230 247 210 230 250 270 290 40 44 48 52 55 179 196 213 230 247 210 230 250 270 290 3,250 3,300 3,350 3,400 3,450 3,300 3,350 3,400 3,450 3,500 251 254 258 262 266 1,114 1,131 1,148 1,165 1,182 1,310 1,330 1,350 1,370 1,390 251 254 258 262 266 1,114 1,131 1,148 1,165 1,182 1,310 1,330 1,350 1,370 1,390 750 800 850 900 950 800 850 900 950 1,000 59 63 67 71 75 264 281 298 315 332 310 330 350 370 390 59 63 67 71 75 264 281 298 315 332 310 330 350 370 390 3,500 3,550 3,600 3,650 3,700 3,550 3,600 3,650 3,700 3,750 270 273 277 281 285 1,199 1,216 1,233 1,250 1,267 1,410 1,430 1,450 1,470 1,490 270 273 277 281 285 1,199 1,216 1,233 1,250 1,267 1,410 1,430 1,450 1,470 1,490 1,000 1,050 1,100 1,150 1,200 1,050 1,100 1,150 1,200 1,250 78 82 86 90 94 349 366 383 400 417 410 430 450 470 490 78 82 86 90 94 349 366 383 400 417 410 430 450 470 490 3,750 3,800 3,850 3,900 3,950 3,800 3,850 3,900 3,950 4,000 289 293 296 300 304 1,284 1,301 1,318 1,335 1,352 1,510 1,530 1,550 1,570 1,590 289 293 296 300 304 1,284 1,301 1,318 1,335 1,352 1,510 1,530 1,550 1,570 1,590 1,250 1,300 1,350 1,400 1,450 1,300 1,350 1,400 1,450 1,500 98 101 105 109 113 434 451 468 485 502 510 530 550 570 590 98 101 105 109 113 434 451 468 485 502 510 530 550 570 590 4,000 4,050 4,100 4,150 4,200 4,050 4,100 4,150 4,200 4,250 308 312 316 319 323 1,369 1,386 1,403 1,420 1,437 1,610 1,630 1,650 1,670 1,690 308 312 316 319 323 1,369 1,386 1,403 1,420 1,437 1,610 1,630 1,650 1,670 1,690 1,500 1,550 1,600 1,650 1,700 1,550 1,600 1,650 1,700 1,750 117 120 124 128 132 519 536 553 570 587 610 630 650 670 690 117 120 124 128 132 519 536 553 570 587 610 630 650 670 690 4,250 4,300 4,350 4,400 4,450 4,300 4,350 4,400 4,450 4,500 327 331 335 339 342 1,454 1,471 1,488 1,505 1,522 1,710 1,730 1,750 1,770 1,790 327 331 335 339 342 1,454 1,471 1,488 1,505 1,522 1,710 1,730 1,750 1,770 1,790 1,750 1,800 1,850 1,900 1,950 1,800 1,850 1,900 1,950 2,000 136 140 143 147 151 604 621 638 655 672 710 730 750 770 790 136 140 143 147 151 604 621 638 655 672 710 730 750 770 790 4,500 4,550 4,600 4,650 4,700 4,550 4,600 4,650 4,700 4,750 346 350 354 358 361 1,539 1,556 1,573 1,590 1,607 1,810 1,830 1,850 1,870 1,890 346 350 354 358 361 1,539 1,556 1,573 1,590 1,607 1,810 1,830 1,850 1,870 1,890 2,000 2,050 2,100 2,150 2,200 2,050 2,100 2,150 2,200 2,250 155 159 163 166 170 689 706 723 740 757 810 830 850 870 890 155 159 163 166 170 689 706 723 740 757 810 830 850 870 890 4,750 4,800 4,850 4,900 4,950 4,800 4,850 4,900 4,950 5,000 365 369 373 377 381 1,624 1,641 1,658 1,675 1,692 1,910 1,930 1,950 1,970 1,990 365 369 373 377 381 1,624 1,641 1,658 1,675 1,692 1,910 1,930 1,950 1,970 1,990 2,250 2,300 2,350 2,400 2,450 2,300 2,350 2,400 2,450 2,500 174 178 182 186 189 774 791 808 825 842 910 930 950 970 990 174 178 182 186 189 774 791 808 825 842 910 930 950 970 990 5,000 5,050 5,100 5,150 5,200 5,050 5,100 5,150 5,200 5,250 384 388 390 390 390 1,709 1,726 1,743 1,760 1,777 2,010 2,030 2,050 2,070 2,090 384 388 390 390 390 1,709 1,726 1,743 1,760 1,777 2,010 2,030 2,050 2,070 2,090 2,500 2,550 2,600 2,650 2,700 2,550 2,600 2,650 2,700 2,750 193 197 201 205 208 859 876 893 910 927 1,010 1,030 1,050 1,070 1,090 193 197 201 205 208 859 876 893 910 927 1,010 1,030 1,050 1,070 1,090 5,250 5,300 5,350 5,400 5,450 5,300 5,350 5,400 5,450 5,500 390 390 390 390 390 1,794 1,811 1,828 1,845 1,862 2,110 2,130 2,150 2,170 2,190 390 390 390 390 390 1,794 1,811 1,828 1,845 1,862 2,110 2,130 2,150 2,170 2,190 (Continued on page 49) Need more information or forms? See page 7. - 48 - Page 49 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Earned Income Credit (EIC) Table—Continued (Caution. This is not a tax table.) And your filing status is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children At least But less than One child Two No children children Your credit is— And your filing status is— Married filing jointly and you have— One child If the amount you are looking up from the worksheet is— Two children Your credit is— Single, head of household, or qualifying widow(er) and you have— No children At least But less than One child Married filing jointly and you have— Two No children children Your credit is— One child Two children Your credit is— 5,500 5,550 5,600 5,650 5,700 5,550 5,600 5,650 5,700 5,750 390 390 390 390 390 1,879 1,896 1,913 1,930 1,947 2,210 2,230 2,250 2,270 2,290 390 390 390 390 390 1,879 1,896 1,913 1,930 1,947 2,210 2,230 2,250 2,270 2,290 8,500 8,550 8,600 8,650 8,700 8,550 8,600 8,650 8,700 8,750 227 223 219 215 212 2,604 2,604 2,604 2,604 2,604 3,410 3,430 3,450 3,470 3,490 303 299 296 292 288 2,604 2,604 2,604 2,604 2,604 3,410 3,430 3,450 3,470 3,490 5,750 5,800 5,850 5,900 5,950 5,800 5,850 5,900 5,950 6,000 390 390 390 390 390 1,964 1,981 1,998 2,015 2,032 2,310 2,330 2,350 2,370 2,390 390 390 390 390 390 1,964 1,981 1,998 2,015 2,032 2,310 2,330 2,350 2,370 2,390 8,750 8,800 8,850 8,900 8,950 8,800 8,850 8,900 8,950 9,000 208 204 200 196 192 2,604 2,604 2,604 2,604 2,604 3,510 3,530 3,550 3,570 3,590 284 280 277 273 269 2,604 2,604 2,604 2,604 2,604 3,510 3,530 3,550 3,570 3,590 6,000 6,050 6,100 6,150 6,200 6,050 6,100 6,150 6,200 6,250 390 390 390 390 390 2,049 2,066 2,083 2,100 2,117 2,410 2,430 2,450 2,470 2,490 390 390 390 390 390 2,049 2,066 2,083 2,100 2,117 2,410 2,430 2,450 2,470 2,490 9,000 9,050 9,100 9,150 9,200 9,050 9,100 9,150 9,200 9,250 189 185 181 177 173 2,604 2,604 2,604 2,604 2,604 3,610 3,630 3,650 3,670 3,690 265 261 257 254 250 2,604 2,604 2,604 2,604 2,604 3,610 3,630 3,650 3,670 3,690 6,250 6,300 6,350 6,400 6,450 6,300 6,350 6,400 6,450 6,500 390 390 390 387 384 2,134 2,151 2,168 2,185 2,202 2,510 2,530 2,550 2,570 2,590 390 390 390 390 390 2,134 2,151 2,168 2,185 2,202 2,510 2,530 2,550 2,570 2,590 9,250 9,300 9,350 9,400 9,450 9,300 9,350 9,400 9,450 9,500 169 166 162 158 154 2,604 2,604 2,604 2,604 2,604 3,710 3,730 3,750 3,770 3,790 246 242 238 234 231 2,604 2,604 2,604 2,604 2,604 3,710 3,730 3,750 3,770 3,790 6,500 6,550 6,600 6,650 6,700 6,550 6,600 6,650 6,700 6,750 380 376 372 368 365 2,219 2,236 2,253 2,270 2,287 2,610 2,630 2,650 2,670 2,690 390 390 390 390 390 2,219 2,236 2,253 2,270 2,287 2,610 2,630 2,650 2,670 2,690 9,500 9,550 9,600 9,650 9,700 9,550 9,600 9,650 9,700 9,750 150 146 143 139 135 2,604 2,604 2,604 2,604 2,604 3,810 3,830 3,850 3,870 3,890 227 223 219 215 212 2,604 2,604 2,604 2,604 2,604 3,810 3,830 3,850 3,870 3,890 6,750 6,800 6,850 6,900 6,950 6,800 6,850 6,900 6,950 7,000 361 357 353 349 345 2,304 2,321 2,338 2,355 2,372 2,710 2,730 2,750 2,770 2,790 390 390 390 390 390 2,304 2,321 2,338 2,355 2,372 2,710 2,730 2,750 2,770 2,790 9,750 9,800 9,850 9,900 9,950 9,800 9,850 9,900 9,950 10,000 131 127 124 120 116 2,604 2,604 2,604 2,604 2,604 3,910 3,930 3,950 3,970 3,990 208 204 200 196 192 2,604 2,604 2,604 2,604 2,604 3,910 3,930 3,950 3,970 3,990 7,000 7,050 7,100 7,150 7,200 7,050 7,100 7,150 7,200 7,250 342 338 334 330 326 2,389 2,406 2,423 2,440 2,457 2,810 2,830 2,850 2,870 2,890 390 390 390 390 390 2,389 2,406 2,423 2,440 2,457 2,810 2,830 2,850 2,870 2,890 10,000 10,050 10,100 10,150 10,200 10,050 10,100 10,150 10,200 10,250 112 108 104 101 97 2,604 2,604 2,604 2,604 2,604 4,010 4,030 4,050 4,070 4,090 189 185 181 177 173 2,604 2,604 2,604 2,604 2,604 4,010 4,030 4,050 4,070 4,090 7,250 7,300 7,350 7,400 7,450 7,300 7,350 7,400 7,450 7,500 322 319 315 311 307 2,474 2,491 2,508 2,525 2,542 2,910 2,930 2,950 2,970 2,990 390 390 390 387 384 2,474 2,491 2,508 2,525 2,542 2,910 2,930 2,950 2,970 2,990 10,250 10,300 10,350 10,400 10,450 10,300 10,350 10,400 10,450 10,500 93 89 85 81 78 2,604 2,604 2,604 2,604 2,604 4,110 4,130 4,150 4,170 4,190 169 166 162 158 154 2,604 2,604 2,604 2,604 2,604 4,110 4,130 4,150 4,170 4,190 7,500 7,550 7,600 7,650 7,700 7,550 7,600 7,650 7,700 7,750 303 299 296 292 288 2,559 2,576 2,593 2,604 2,604 3,010 3,030 3,050 3,070 3,090 380 376 372 368 365 2,559 2,576 2,593 2,604 2,604 3,010 3,030 3,050 3,070 3,090 10,500 10,550 10,600 10,650 10,700 10,550 10,600 10,650 10,700 10,750 74 70 66 62 59 2,604 2,604 2,604 2,604 2,604 4,210 4,230 4,250 4,270 4,290 150 146 143 139 135 2,604 2,604 2,604 2,604 2,604 4,210 4,230 4,250 4,270 4,290 7,750 7,800 7,850 7,900 7,950 7,800 7,850 7,900 7,950 8,000 284 280 277 273 269 2,604 2,604 2,604 2,604 2,604 3,110 3,130 3,150 3,170 3,190 361 357 353 349 345 2,604 2,604 2,604 2,604 2,604 3,110 3,130 3,150 3,170 3,190 10,750 10,800 10,850 10,900 10,950 10,800 10,850 10,900 10,950 11,000 55 51 47 43 39 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 131 127 124 120 116 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 8,000 8,050 8,100 8,150 8,200 8,050 8,100 8,150 8,200 8,250 265 261 257 254 250 2,604 2,604 2,604 2,604 2,604 3,210 3,230 3,250 3,270 3,290 342 338 334 330 326 2,604 2,604 2,604 2,604 2,604 3,210 3,230 3,250 3,270 3,290 11,000 11,050 11,100 11,150 11,200 11,050 11,100 11,150 11,200 11,250 36 32 28 24 20 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 112 108 104 101 97 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 8,250 8,300 8,350 8,400 8,450 8,300 8,350 8,400 8,450 8,500 246 242 238 234 231 2,604 2,604 2,604 2,604 2,604 3,310 3,330 3,350 3,370 3,390 322 319 315 311 307 2,604 2,604 2,604 2,604 2,604 3,310 3,330 3,350 3,370 3,390 11,250 11,300 11,350 11,400 11,450 11,300 11,350 11,400 11,450 11,500 16 13 9 5 * 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 93 89 85 81 78 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 *If the amount you are looking up from the worksheet is at least $11,450 ($12,450 if married filing jointly) but less than $11,490 ($12,490 if married filing jointly), your credit is $2. Otherwise, you cannot take the credit. (Continued on page 50) - 49 - Need more information or forms? See page 7. Page 50 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Earned Income Credit (EIC) Table—Continued (Caution. This is not a tax table.) And your filing status is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children One child Two No children children Your credit is— And your filing status is— Married filing jointly and you have— One child At least But less than 11,500 11,550 11,600 11,650 11,700 11,550 11,600 11,650 11,700 11,750 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 74 70 66 62 59 2,604 2,604 2,604 2,604 2,604 11,750 11,800 11,850 11,900 11,950 11,800 11,850 11,900 11,950 12,000 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 55 51 47 43 39 12,000 12,050 12,100 12,150 12,200 12,050 12,100 12,150 12,200 12,250 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 12,250 12,300 12,350 12,400 12,450 12,300 12,350 12,400 12,450 12,500 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 12,500 14,050 14,100 14,150 14,200 14,050 14,100 14,150 14,200 14,250 0 0 0 0 0 14,250 14,300 14,350 14,400 14,450 14,300 14,350 14,400 14,450 14,500 14,500 14,550 14,600 14,650 14,700 If the amount you are looking up from the worksheet is— Two children Your credit is— Single, head of household, or qualifying widow(er) and you have— No children One child Married filing jointly and you have— Two No children children Your credit is— One child Two children At least But less than Your credit is— 4,300 4,300 4,300 4,300 4,300 16,000 16,050 16,100 16,150 16,200 16,050 16,100 16,150 16,200 16,250 0 0 0 0 0 2,287 2,279 2,271 2,263 2,255 3,882 3,871 3,861 3,850 3,840 0 0 0 0 0 2,447 2,439 2,431 2,423 2,415 4,093 4,082 4,071 4,061 4,050 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 16,250 16,300 16,350 16,400 16,450 16,300 16,350 16,400 16,450 16,500 0 0 0 0 0 2,247 2,239 2,231 2,223 2,215 3,829 3,819 3,808 3,798 3,787 0 0 0 0 0 2,407 2,399 2,391 2,383 2,375 4,040 4,029 4,019 4,008 3,998 36 32 28 24 20 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 16,500 16,550 16,600 16,650 16,700 16,550 16,600 16,650 16,700 16,750 0 0 0 0 0 2,207 2,199 2,191 2,183 2,175 3,777 3,766 3,756 3,745 3,735 0 0 0 0 0 2,367 2,359 2,351 2,343 2,335 3,987 3,977 3,966 3,956 3,945 4,300 4,300 4,300 4,300 4,300 16 13 9 5 * 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 16,750 16,800 16,850 16,900 16,950 16,800 16,850 16,900 16,950 17,000 0 0 0 0 0 2,167 2,159 2,151 2,143 2,135 3,724 3,713 3,703 3,692 3,682 0 0 0 0 0 2,327 2,319 2,311 2,303 2,295 3,935 3,924 3,914 3,903 3,892 2,604 2,599 2,591 2,583 2,575 4,300 4,293 4,282 4,272 4,261 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 17,000 17,050 17,100 17,150 17,200 17,050 17,100 17,150 17,200 17,250 0 0 0 0 0 2,127 2,119 2,111 2,103 2,095 3,671 3,661 3,650 3,640 3,629 0 0 0 0 0 2,287 2,279 2,271 2,263 2,255 3,882 3,871 3,861 3,850 3,840 0 0 0 0 0 2,567 2,559 2,551 2,543 2,535 4,251 4,240 4,229 4,219 4,208 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 17,250 17,300 17,350 17,400 17,450 17,300 17,350 17,400 17,450 17,500 0 0 0 0 0 2,087 2,079 2,071 2,063 2,055 3,619 3,608 3,598 3,587 3,577 0 0 0 0 0 2,247 2,239 2,231 2,223 2,215 3,829 3,819 3,808 3,798 3,787 14,550 14,600 14,650 14,700 14,750 0 0 0 0 0 2,527 2,519 2,511 2,503 2,495 4,198 4,187 4,177 4,166 4,156 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 17,500 17,550 17,600 17,650 17,700 17,550 17,600 17,650 17,700 17,750 0 0 0 0 0 2,047 2,040 2,032 2,024 2,016 3,566 3,556 3,545 3,534 3,524 0 0 0 0 0 2,207 2,199 2,191 2,183 2,175 3,777 3,766 3,756 3,745 3,735 14,750 14,800 14,850 14,900 14,950 14,800 14,850 14,900 14,950 15,000 0 0 0 0 0 2,487 2,479 2,471 2,463 2,455 4,145 4,135 4,124 4,114 4,103 0 0 0 0 0 2,604 2,604 2,604 2,604 2,604 4,300 4,300 4,300 4,300 4,300 17,750 17,800 17,850 17,900 17,950 17,800 17,850 17,900 17,950 18,000 0 0 0 0 0 2,008 2,000 1,992 1,984 1,976 3,513 3,503 3,492 3,482 3,471 0 0 0 0 0 2,167 2,159 2,151 2,143 2,135 3,724 3,713 3,703 3,692 3,682 15,000 15,050 15,100 15,150 15,200 15,050 15,100 15,150 15,200 15,250 0 0 0 0 0 2,447 2,439 2,431 2,423 2,415 4,093 4,082 4,071 4,061 4,050 0 0 0 0 0 2,604 2,599 2,591 2,583 2,575 4,300 4,293 4,282 4,272 4,261 18,000 18,050 18,100 18,150 18,200 18,050 18,100 18,150 18,200 18,250 0 0 0 0 0 1,968 1,960 1,952 1,944 1,936 3,461 3,450 3,440 3,429 3,419 0 0 0 0 0 2,127 2,119 2,111 2,103 2,095 3,671 3,661 3,650 3,640 3,629 15,250 15,300 15,350 15,400 15,450 15,300 15,350 15,400 15,450 15,500 0 0 0 0 0 2,407 2,399 2,391 2,383 2,375 4,040 4,029 4,019 4,008 3,998 0 0 0 0 0 2,567 2,559 2,551 2,543 2,535 4,251 4,240 4,229 4,219 4,208 18,250 18,300 18,350 18,400 18,450 18,300 18,350 18,400 18,450 18,500 0 0 0 0 0 1,928 1,920 1,912 1,904 1,896 3,408 3,398 3,387 3,377 3,366 0 0 0 0 0 2,087 2,079 2,071 2,063 2,055 3,619 3,608 3,598 3,587 3,577 15,500 15,550 15,600 15,650 15,700 15,550 15,600 15,650 15,700 15,750 0 0 0 0 0 2,367 2,359 2,351 2,343 2,335 3,987 3,977 3,966 3,956 3,945 0 0 0 0 0 2,527 2,519 2,511 2,503 2,495 4,198 4,187 4,177 4,166 4,156 18,500 18,550 18,600 18,650 18,700 18,550 18,600 18,650 18,700 18,750 0 0 0 0 0 1,888 1,880 1,872 1,864 1,856 3,355 3,345 3,334 3,324 3,313 0 0 0 0 0 2,047 2,040 2,032 2,024 2,016 3,566 3,556 3,545 3,534 3,524 15,750 15,800 15,850 15,900 15,950 15,800 15,850 15,900 15,950 16,000 0 0 0 0 0 2,327 2,319 2,311 2,303 2,295 3,935 3,924 3,914 3,903 3,892 0 0 0 0 0 2,487 2,479 2,471 2,463 2,455 4,145 4,135 4,124 4,114 4,103 18,750 18,800 18,850 18,900 18,950 18,800 18,850 18,900 18,950 19,000 0 0 0 0 0 1,848 1,840 1,832 1,824 1,816 3,303 3,292 3,282 3,271 3,261 0 0 0 0 0 2,008 2,000 1,992 1,984 1,976 3,513 3,503 3,492 3,482 3,471 *If the amount you are looking up from the worksheet is at least $11,450 ($12,450 if married filing jointly) but less than $11,490 ( $12,490 if married filing jointly), your credit is $2. Otherwise, you cannot take the credit. (Continued on page 51) Need more information or forms? See page 7. - 50 - Page 51 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Earned Income Credit (EIC) Table—Continued (Caution. This is not a tax table.) And your filing status is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children One child And your filing status is— Married filing jointly and you have— Two No children children Your credit is— One child Two children Your credit is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children One child Married filing jointly and you have— Two No children children One child Two children At least But less than At least But less than 19,000 19,050 19,100 19,150 19,200 19,050 19,100 19,150 19,200 19,250 0 0 0 0 0 1,808 1,800 1,792 1,784 1,776 3,250 3,240 3,229 3,219 3,208 0 0 0 0 0 1,968 1,960 1,952 1,944 1,936 3,461 3,450 3,440 3,429 3,419 22,000 22,050 22,100 22,150 22,200 22,050 22,100 22,150 22,200 22,250 0 0 0 0 0 1,328 1,320 1,312 1,304 1,296 2,618 2,608 2,597 2,587 2,576 0 0 0 0 0 1,488 1,480 1,472 1,464 1,456 2,829 2,818 2,808 2,797 2,787 19,250 19,300 19,350 19,400 19,450 19,300 19,350 19,400 19,450 19,500 0 0 0 0 0 1,768 1,760 1,752 1,744 1,736 3,198 3,187 3,176 3,166 3,155 0 0 0 0 0 1,928 1,920 1,912 1,904 1,896 3,408 3,398 3,387 3,377 3,366 22,250 22,300 22,350 22,400 22,450 22,300 22,350 22,400 22,450 22,500 0 0 0 0 0 1,288 1,280 1,272 1,264 1,256 2,566 2,555 2,545 2,534 2,524 0 0 0 0 0 1,448 1,440 1,432 1,424 1,416 2,776 2,766 2,755 2,745 2,734 19,500 19,550 19,600 19,650 19,700 19,550 19,600 19,650 19,700 19,750 0 0 0 0 0 1,728 1,720 1,712 1,704 1,696 3,145 3,134 3,124 3,113 3,103 0 0 0 0 0 1,888 1,880 1,872 1,864 1,856 3,355 3,345 3,334 3,324 3,313 22,500 22,550 22,600 22,650 22,700 22,550 22,600 22,650 22,700 22,750 0 0 0 0 0 1,248 1,241 1,233 1,225 1,217 2,513 2,503 2,492 2,481 2,471 0 0 0 0 0 1,408 1,400 1,392 1,384 1,376 2,724 2,713 2,703 2,692 2,682 19,750 19,800 19,850 19,900 19,950 19,800 19,850 19,900 19,950 20,000 0 0 0 0 0 1,688 1,680 1,672 1,664 1,656 3,092 3,082 3,071 3,061 3,050 0 0 0 0 0 1,848 1,840 1,832 1,824 1,816 3,303 3,292 3,282 3,271 3,261 22,750 22,800 22,850 22,900 22,950 22,800 22,850 22,900 22,950 23,000 0 0 0 0 0 1,209 1,201 1,193 1,185 1,177 2,460 2,450 2,439 2,429 2,418 0 0 0 0 0 1,368 1,360 1,352 1,344 1,336 2,671 2,660 2,650 2,639 2,629 20,000 20,050 20,100 20,150 20,200 20,050 20,100 20,150 20,200 20,250 0 0 0 0 0 1,648 1,640 1,632 1,624 1,616 3,040 3,029 3,018 3,008 2,997 0 0 0 0 0 1,808 1,800 1,792 1,784 1,776 3,250 3,240 3,229 3,219 3,208 23,000 23,050 23,100 23,150 23,200 23,050 23,100 23,150 23,200 23,250 0 0 0 0 0 1,169 1,161 1,153 1,145 1,137 2,408 2,397 2,387 2,376 2,366 0 0 0 0 0 1,328 1,320 1,312 1,304 1,296 2,618 2,608 2,597 2,587 2,576 20,250 20,300 20,350 20,400 20,450 20,300 20,350 20,400 20,450 20,500 0 0 0 0 0 1,608 1,600 1,592 1,584 1,576 2,987 2,976 2,966 2,955 2,945 0 0 0 0 0 1,768 1,760 1,752 1,744 1,736 3,198 3,187 3,176 3,166 3,155 23,250 23,300 23,350 23,400 23,450 23,300 23,350 23,400 23,450 23,500 0 0 0 0 0 1,129 1,121 1,113 1,105 1,097 2,355 2,345 2,334 2,324 2,313 0 0 0 0 0 1,288 1,280 1,272 1,264 1,256 2,566 2,555 2,545 2,534 2,524 20,500 20,550 20,600 20,650 20,700 20,550 20,600 20,650 20,700 20,750 0 0 0 0 0 1,568 1,560 1,552 1,544 1,536 2,934 2,924 2,913 2,903 2,892 0 0 0 0 0 1,728 1,720 1,712 1,704 1,696 3,145 3,134 3,124 3,113 3,103 23,500 23,550 23,600 23,650 23,700 23,550 23,600 23,650 23,700 23,750 0 0 0 0 0 1,089 1,081 1,073 1,065 1,057 2,302 2,292 2,281 2,271 2,260 0 0 0 0 0 1,248 1,241 1,233 1,225 1,217 2,513 2,503 2,492 2,481 2,471 20,750 20,800 20,850 20,900 20,950 20,800 20,850 20,900 20,950 21,000 0 0 0 0 0 1,528 1,520 1,512 1,504 1,496 2,882 2,871 2,861 2,850 2,839 0 0 0 0 0 1,688 1,680 1,672 1,664 1,656 3,092 3,082 3,071 3,061 3,050 23,750 23,800 23,850 23,900 23,950 23,800 23,850 23,900 23,950 24,000 0 0 0 0 0 1,049 1,041 1,033 1,025 1,017 2,250 2,239 2,229 2,218 2,208 0 0 0 0 0 1,209 1,201 1,193 1,185 1,177 2,460 2,450 2,439 2,429 2,418 21,000 21,050 21,100 21,150 21,200 21,050 21,100 21,150 21,200 21,250 0 0 0 0 0 1,488 1,480 1,472 1,464 1,456 2,829 2,818 2,808 2,797 2,787 0 0 0 0 0 1,648 1,640 1,632 1,624 1,616 3,040 3,029 3,018 3,008 2,997 24,000 24,050 24,100 24,150 24,200 24,050 24,100 24,150 24,200 24,250 0 0 0 0 0 1,009 1,001 993 985 977 2,197 2,187 2,176 2,166 2,155 0 0 0 0 0 1,169 1,161 1,153 1,145 1,137 2,408 2,397 2,387 2,376 2,366 21,250 21,300 21,350 21,400 21,450 21,300 21,350 21,400 21,450 21,500 0 0 0 0 0 1,448 1,440 1,432 1,424 1,416 2,776 2,766 2,755 2,745 2,734 0 0 0 0 0 1,608 1,600 1,592 1,584 1,576 2,987 2,976 2,966 2,955 2,945 24,250 24,300 24,350 24,400 24,450 24,300 24,350 24,400 24,450 24,500 0 0 0 0 0 969 961 953 945 937 2,145 2,134 2,123 2,113 2,102 0 0 0 0 0 1,129 1,121 1,113 1,105 1,097 2,355 2,345 2,334 2,324 2,313 21,500 21,550 21,600 21,650 21,700 21,550 21,600 21,650 21,700 21,750 0 0 0 0 0 1,408 1,400 1,392 1,384 1,376 2,724 2,713 2,703 2,692 2,682 0 0 0 0 0 1,568 1,560 1,552 1,544 1,536 2,934 2,924 2,913 2,903 2,892 24,500 24,550 24,600 24,650 24,700 24,550 24,600 24,650 24,700 24,750 0 0 0 0 0 929 921 913 905 897 2,092 2,081 2,071 2,060 2,050 0 0 0 0 0 1,089 1,081 1,073 1,065 1,057 2,302 2,292 2,281 2,271 2,260 21,750 21,800 21,850 21,900 21,950 21,800 21,850 21,900 21,950 22,000 0 0 0 0 0 1,368 1,360 1,352 1,344 1,336 2,671 2,660 2,650 2,639 2,629 0 0 0 0 0 1,528 1,520 1,512 1,504 1,496 2,882 2,871 2,861 2,850 2,839 24,750 24,800 24,850 24,900 24,950 24,800 24,850 24,900 24,950 25,000 0 0 0 0 0 889 881 873 865 857 2,039 2,029 2,018 2,008 1,997 0 0 0 0 0 1,049 1,041 1,033 1,025 1,017 2,250 2,239 2,229 2,218 2,208 Your credit is— Your credit is— (Continued on page 52) - 51 - Need more information or forms? See page 7. Page 52 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Earned Income Credit (EIC) Table—Continued (Caution. This is not a tax table.) And your filing status is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children One child Two No children children Your credit is— And your filing status is— Married filing jointly and you have— One child Two children Your credit is— If the amount you are looking up from the worksheet is— Single, head of household, or qualifying widow(er) and you have— No children One child Married filing jointly and you have— Two No children children One child Two children At least But less than At least But less than 25,000 25,050 25,100 25,150 25,200 25,050 25,100 25,150 25,200 25,250 0 0 0 0 0 849 841 833 825 817 1,987 1,976 1,965 1,955 1,944 0 0 0 0 0 1,009 1,001 993 985 977 2,197 2,187 2,176 2,166 2,155 28,000 28,050 28,100 28,150 28,200 28,050 28,100 28,150 28,200 28,250 0 0 0 0 0 370 362 354 346 338 1,355 1,344 1,334 1,323 1,313 0 0 0 0 0 529 521 513 505 497 1,565 1,555 1,544 1,534 1,523 25,250 25,300 25,350 25,400 25,450 25,300 25,350 25,400 25,450 25,500 0 0 0 0 0 809 801 793 785 777 1,934 1,923 1,913 1,902 1,892 0 0 0 0 0 969 961 953 945 937 2,145 2,134 2,123 2,113 2,102 28,250 28,300 28,350 28,400 28,450 28,300 28,350 28,400 28,450 28,500 0 0 0 0 0 330 322 314 306 298 1,302 1,292 1,281 1,271 1,260 0 0 0 0 0 489 481 473 465 457 1,513 1,502 1,492 1,481 1,471 25,500 25,550 25,600 25,650 25,700 25,550 25,600 25,650 25,700 25,750 0 0 0 0 0 769 761 753 745 737 1,881 1,871 1,860 1,850 1,839 0 0 0 0 0 929 921 913 905 897 2,092 2,081 2,071 2,060 2,050 28,500 28,550 28,600 28,650 28,700 28,550 28,600 28,650 28,700 28,750 0 0 0 0 0 290 282 274 266 258 1,249 1,239 1,228 1,218 1,207 0 0 0 0 0 449 442 434 426 418 1,460 1,450 1,439 1,428 1,418 25,750 25,800 25,850 25,900 25,950 25,800 25,850 25,900 25,950 26,000 0 0 0 0 0 729 721 713 705 697 1,829 1,818 1,808 1,797 1,786 0 0 0 0 0 889 881 873 865 857 2,039 2,029 2,018 2,008 1,997 28,750 28,800 28,850 28,900 28,950 28,800 28,850 28,900 28,950 29,000 0 0 0 0 0 250 242 234 226 218 1,197 1,186 1,176 1,165 1,155 0 0 0 0 0 410 402 394 386 378 1,407 1,397 1,386 1,376 1,365 26,000 26,050 26,100 26,150 26,200 26,050 26,100 26,150 26,200 26,250 0 0 0 0 0 689 681 673 665 657 1,776 1,765 1,755 1,744 1,734 0 0 0 0 0 849 841 833 825 817 1,987 1,976 1,965 1,955 1,944 29,000 29,050 29,100 29,150 29,200 29,050 29,100 29,150 29,200 29,250 0 0 0 0 0 210 202 194 186 178 1,144 1,134 1,123 1,113 1,102 0 0 0 0 0 370 362 354 346 338 1,355 1,344 1,334 1,323 1,313 26,250 26,300 26,350 26,400 26,450 26,300 26,350 26,400 26,450 26,500 0 0 0 0 0 649 641 633 625 617 1,723 1,713 1,702 1,692 1,681 0 0 0 0 0 809 801 793 785 777 1,934 1,923 1,913 1,902 1,892 29,250 29,300 29,350 29,400 29,450 29,300 29,350 29,400 29,450 29,500 0 0 0 0 0 170 162 154 146 138 1,092 1,081 1,070 1,060 1,049 0 0 0 0 0 330 322 314 306 298 1,302 1,292 1,281 1,271 1,260 26,500 26,550 26,600 26,650 26,700 26,550 26,600 26,650 26,700 26,750 0 0 0 0 0 609 601 593 585 577 1,671 1,660 1,650 1,639 1,629 0 0 0 0 0 769 761 753 745 737 1,881 1,871 1,860 1,850 1,839 29,500 29,550 29,600 29,650 29,700 29,550 29,600 29,650 29,700 29,750 0 0 0 0 0 130 122 114 106 98 1,039 1,028 1,018 1,007 997 0 0 0 0 0 290 282 274 266 258 1,249 1,239 1,228 1,218 1,207 26,750 26,800 26,850 26,900 26,950 26,800 26,850 26,900 26,950 27,000 0 0 0 0 0 569 561 553 545 537 1,618 1,607 1,597 1,586 1,576 0 0 0 0 0 729 721 713 705 697 1,829 1,818 1,808 1,797 1,786 29,750 29,800 29,850 29,900 29,950 29,800 29,850 29,900 29,950 30,000 0 0 0 0 0 90 82 74 66 58 986 976 965 955 944 0 0 0 0 0 250 242 234 226 218 1,197 1,186 1,176 1,165 1,155 27,000 27,050 27,100 27,150 27,200 27,050 27,100 27,150 27,200 27,250 0 0 0 0 0 529 521 513 505 497 1,565 1,555 1,544 1,534 1,523 0 0 0 0 0 689 681 673 665 657 1,776 1,765 1,755 1,744 1,734 30,000 30,050 30,100 30,150 30,200 30,050 30,100 30,150 30,200 30,250 0 0 0 0 0 50 42 34 26 18 934 923 912 902 891 0 0 0 0 0 210 202 194 186 178 1,144 1,134 1,123 1,113 1,102 27,250 27,300 27,350 27,400 27,450 27,300 27,350 27,400 27,450 27,500 0 0 0 0 0 489 481 473 465 457 1,513 1,502 1,492 1,481 1,471 0 0 0 0 0 649 641 633 625 617 1,723 1,713 1,702 1,692 1,681 30,250 30,300 30,350 30,400 30,450 30,300 30,350 30,400 30,450 30,500 0 0 0 0 0 10 ** 0 0 0 881 870 860 849 839 0 0 0 0 0 170 162 154 146 138 1,092 1,081 1,070 1,060 1,049 27,500 27,550 27,600 27,650 27,700 27,550 27,600 27,650 27,700 27,750 0 0 0 0 0 449 442 434 426 418 1,460 1,450 1,439 1,428 1,418 0 0 0 0 0 609 601 593 585 577 1,671 1,660 1,650 1,639 1,629 30,500 30,550 30,600 30,650 30,700 30,550 30,600 30,650 30,700 30,750 0 0 0 0 0 0 0 0 0 0 828 818 807 797 786 0 0 0 0 0 130 122 114 106 98 1,039 1,028 1,018 1,007 997 27,750 27,800 27,850 27,900 27,950 27,800 27,850 27,900 27,950 28,000 0 0 0 0 0 410 402 394 386 378 1,407 1,397 1,386 1,376 1,365 0 0 0 0 0 569 561 553 545 537 1,618 1,607 1,597 1,586 1,576 30,750 30,800 30,850 30,900 30,950 30,800 30,850 30,900 30,950 31,000 0 0 0 0 0 0 0 0 0 0 776 765 755 744 733 0 0 0 0 0 90 82 74 66 58 986 976 965 955 944 Your credit is— Your credit is— **If the amount you are looking up from the worksheet is at least $30,300 ($31,300 if married filing jointly) but less than $30,338 ($31,338 if married filing jointly), your credit is $3. Otherwise, you cannot take the credit. (Continued on page 53) Need more information or forms? See page 7. - 52 - Page 53 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Earned Income Credit (EIC) Table—Continued (Caution. This is not a tax table.) And your filing status is— If the amount you are looking up from the worksheet is— At least But less than Single, head of household, or qualifying widow(er) and you have— No children One child Two No children children Your credit is— And your filing status is— Married filing jointly and you have— One child Two children Your credit is— If the amount you are looking up from the worksheet is— At least Single, head of household, or qualifying widow(er) and you have— No children But less than One child Married filing jointly and you have— Two No children children Your credit is— One child Two children Your credit is— 31,000 31,050 31,100 31,150 31,200 31,050 31,100 31,150 31,200 31,250 0 0 0 0 0 0 0 0 0 0 723 712 702 691 681 0 0 0 0 0 50 42 34 26 18 934 923 912 902 891 33,500 33,550 33,600 33,650 33,700 33,550 33,600 33,650 33,700 33,750 0 0 0 0 0 0 0 0 0 0 196 186 175 165 154 0 0 0 0 0 0 0 0 0 0 407 397 386 375 365 31,250 31,300 31,350 31,400 31,450 31,300 31,350 31,400 31,450 31,500 0 0 0 0 0 0 0 0 0 0 670 660 649 639 628 0 0 0 0 0 10 ** 0 0 0 881 870 860 849 839 33,750 33,800 33,850 33,900 33,950 33,800 33,850 33,900 33,950 34,000 0 0 0 0 0 0 0 0 0 0 144 133 123 112 102 0 0 0 0 0 0 0 0 0 0 354 344 333 323 312 31,500 31,550 31,600 31,650 31,700 31,550 31,600 31,650 31,700 31,750 0 0 0 0 0 0 0 0 0 0 618 607 597 586 576 0 0 0 0 0 0 0 0 0 0 828 818 807 797 786 34,000 34,050 34,100 34,150 34,200 34,050 34,100 34,150 34,200 34,250 0 0 0 0 0 0 0 0 0 0 91 81 70 60 49 0 0 0 0 0 0 0 0 0 0 302 291 281 270 260 31,750 31,800 31,850 31,900 31,950 31,800 31,850 31,900 31,950 32,000 0 0 0 0 0 0 0 0 0 0 565 554 544 533 523 0 0 0 0 0 0 0 0 0 0 776 765 755 744 733 34,250 34,300 34,350 34,400 34,450 34,300 34,350 34,400 34,450 34,500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 249 239 228 218 207 32,000 32,050 32,100 32,150 32,200 32,050 32,100 32,150 32,200 32,250 0 0 0 0 0 0 0 0 0 0 512 502 491 481 470 0 0 0 0 0 0 0 0 0 0 723 712 702 691 681 34,500 34,550 34,600 34,650 34,700 34,550 34,600 34,650 34,700 34,750 0 0 0 0 0 0 0 0 0 0 39 28 17 7 *** 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 196 186 175 165 154 32,250 32,300 32,350 32,400 32,450 32,300 32,350 32,400 32,450 32,500 0 0 0 0 0 0 0 0 0 0 460 449 439 428 418 0 0 0 0 0 0 0 0 0 0 670 660 649 639 628 34,750 34,800 34,850 34,900 34,950 34,800 34,850 34,900 34,950 35,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 144 133 123 112 102 32,500 32,550 32,600 32,650 32,700 32,550 32,600 32,650 32,700 32,750 0 0 0 0 0 0 0 0 0 0 407 397 386 375 365 0 0 0 0 0 0 0 0 0 0 618 607 597 586 576 35,000 35,050 35,100 35,150 35,200 35,050 35,100 35,150 35,200 35,250 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 91 81 70 60 49 32,750 32,800 32,850 32,900 32,950 32,800 32,850 32,900 32,950 33,000 0 0 0 0 0 0 0 0 0 0 354 344 333 323 312 0 0 0 0 0 0 0 0 0 0 565 554 544 533 523 35,250 35,300 35,350 35,400 35,450 35,300 35,350 35,400 35,450 35,458 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 39 28 17 7 1 33,000 33,050 33,100 33,150 33,200 33,050 33,100 33,150 33,200 33,250 0 0 0 0 0 0 0 0 0 0 302 291 281 270 260 0 0 0 0 0 0 0 0 0 0 512 502 491 481 470 35,458 or more 0 0 0 0 0 0 33,250 33,300 33,350 33,400 33,450 33,300 33,350 33,400 33,450 33,500 0 0 0 0 0 0 0 0 0 0 249 239 228 218 207 0 0 0 0 0 0 0 0 0 0 460 449 439 428 418 **If the amount you are looking up from the worksheet is at least $30,300 ($31,300 if married filing jointly) but less than $30,338 ($31,338 if married filing jointly), your credit is $3. Otherwise, you cannot take the credit. ***If the amount you are looking up from the worksheet is at least $34,450 but less than $34,458, your credit is $1. Otherwise, you cannot take the credit. - 53 - Need more information or forms? See page 7. Page 54 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 66 Through 72d Line 66 Excess Social Security and Tier 1 RRTA Tax Withheld If you, or your spouse if filing a joint return, had more than one employer for 2004 and total wages of more than $87,900, too much social security or tier 1 railroad retirement (RRTA) tax may have been withheld. You can take a credit on this line for the amount withheld in excess of $5,449.80. But if any one employer withheld more than $5,449.80, you must ask that employer to refund the excess to you. You cannot claim it on your return. Figure this amount separately for you and your spouse. You cannot claim a refund for excess tier 2 RRTA tax on Form 1040. Instead, use Form 843. For more details, see Pub. 505. Line 67 Additional Child Tax Credit What Is the Additional Child Tax Credit? This credit is for certain people who have at least one qualifying child as defined in the instructions for line 51 on page 37. The additional child tax credit may give you a refund even if you do not owe any tax. Two Steps To Take the Additional Child Tax Credit! Step 1. Be sure you figured the amount, if any, of your child tax credit. See the instructions for line 51 that begin on page 37. Step 2. Read the TIP at the end of your Child Tax Credit Worksheet. Use Form 8812 to see if you can take the additional child tax credit, but only if you meet the condition given in that TIP. Line 68 Amount Paid With Request for Extension To File If you filed Form 4868 to get an automatic extension of time to file Form 1040, enter any amount you paid with that form or by electronic funds withdrawal or credit card. If you paid by credit card, do not include on line 68 the convenience fee you were charged. Also, include any amounts paid with Form 2688 or 2350. Line 69 Lines 72b Through 72d Other Payments Check the box(es) on line 69 to report any credit from Form 2439, 4136, or 8885. Refund Line 71 Amount Overpaid If line 71 is under $1, we will send a refund only on written request. If you want to check the status of your refund, please wait at least 6 weeks (3 weeks if you filed electronically) from the date you filed your return to do so. But if you filed Form 8379 with your return, allow 14 weeks (11 weeks if you filed electronically). See page 8 for details. If the amount you overpaid is large, you may want to decrease TIP the amount of income tax withheld from your pay by filing a new Form W-4. See Income Tax Withholding and Estimated Tax Payments for 2005 on page 57. Refund Offset If you owe past-due federal tax, state income tax, child support, spousal support, or certain federal nontax debts, such as student loans, all or part of the overpayment on line 71 may be used (offset) to pay the past-due amount. Offsets for federal taxes are made by the IRS. All other offsets are made by the Treasury Department’s Financial Management Service (FMS). For federal tax offsets, you will receive a notice from the IRS. For all other offsets, you will receive a notice from FMS. To find out if you may have an offset or if you have any questions about it, contact the agency to which you owe the debt. Injured Spouse Claim If you file a joint return and your spouse has not paid past-due federal tax, state income tax, child support, spousal support, or a federal nontax debt, such as a student loan, part or all of the overpayment on line 71 may be used (offset) to pay the past-due amount. But your part of the overpayment may be refunded to you if certain conditions apply and you complete Form 8379. For details, use TeleTax topic 203 (see page 8) or see Form 8379. Need more information or forms? See page 7. - 54 - DIRECT DEPOSIT Simple. Safe. Secure. Fast Refunds! Choose direct deposit –a fast, simple, safe, secure way to have your refund deposited automatically into your checking or savings account. Complete lines 72b through 72d if you want us to directly deposit the amount shown on line 72a into your checking or savings account at a bank or other financial institution (such as a mutual fund, brokerage firm, or credit union) in the United States instead of sending you a check. Note. If you do not want your refund directly deposited into your account, draw a line through the boxes on lines 72b and 72d. Why Use Direct Deposit? • You get your refund fast — in half the time as paper filers if you e-file. • Payment is more secure — there is no check to get lost. • More convenient. No trip to the bank to deposit your check. • Saves tax dollars. A refund by direct deposit costs less than a check. You can check with your financial institution to make sure your direct deposit will be accepted and to get the correct routing and account numbers. The IRS is not responsible for a lost refund if you enter the wrong account information. If you file a joint return and fill in lines 72b through 72d, you are appointing your spouse as an agent to receive the refund. This appointment cannot be changed later. Line 72b The routing number must be nine digits. The first two digits must be 01 through 12 or 21 through 32. Otherwise, the direct deposit will be rejected and a check sent instead. On the sample check on page 55, the routing number is 250250025. Your check may state that it is payable through a financial institution different from the one at which you have your checking account. If so, do not use the routing number on that check. Instead, contact your financial institution for the correct routing number to enter on line 72b. Line 72d The account number can be up to 17 characters (both numbers and letters). Include hyphens but omit spaces and special symbols. Enter the number from left to right and leave any unused boxes blank. On the sample check on page 55, the account TIP Page 55 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Lines 72b Through 75 number is 20202086. Do not include the check number. Some financial institutions will not allow a joint refund to be deposited into an individual acCAUTION count. If the direct deposit is rejected, a check will be sent instead. The IRS is not responsible if a financial institution rejects a direct deposit. ! Line 73 Applied to Your 2005 Estimated Tax Enter on line 73 the amount, if any, of the overpayment on line 71 you want applied to your 2005 estimated tax. We will apply this amount to your account unless you attach a statement requesting us to apply it to your spouse’s account. Include your spouse’s social security number in the attached statement. ! CAUTION This election to apply part or all of the amount overpaid to your 2005 estimated tax cannot be changed later. Amount You Owe IRS e-file offers an additional payment option: Electronic funds withdrawal. This option allows you to file your return early and schedule your payment for withdrawal from your checking or savings account on a future date up to and including April 15, 2005. IRS e-file also provides proof of receipt of your return and payment by email or through your software package. Visit www.irs.gov/efile for details. Line 74 Amount You Owe Pay your taxes in full by April 15, 2005, to save interest and penalties. You do not have to pay if line 74 is under $1. Include any estimated tax penalty from line 75 in the amount you enter on line 74. You can pay by check, money order, or credit card. Do not include any estimated tax payment for 2005 in your check, money order, or amount you charge. Instead, make the estimated tax payment separately. To pay by check or money order. Make your check or money order payable to the “United States Treasury” for the full amount due. Do not send cash. Do not attach the payment to your return. Write “2004 Form 1040” and your name, address, daytime phone number, and social security number (SSN) on your payment. If you are filing a joint return, enter the SSN shown first on your tax return. To help process your payment, enter the amount on the right side of the check like this: $ XXX.XX. Do not use dashes or lines (for example, do not enter “$ XXX – ” or xx “$ XXX100”). Then, please complete Form 1040-V following the instructions on that form and enclose it in the envelope with your tax return and payment. Although you do not have to use Form 1040-V, doing so allows us to process your payment more accurately and efficiently. To pay by credit card. You may use your American Express Card, Discover Card, MasterCard card, or Visa card. To pay by credit card, call toll free or visit the website of either service provider listed on this page and follow the instructions. A convenience fee will be charged by the TIP Sample Check—Lines 72b Through 72d 1234 JEFFREY MAPLE SUZANNE MAPLE 123 Pear Lane Anyplace, VA 20000 䊲 PL E 15-0000/0000 SA M PAY TO THE ORDER OF ANYPLACE BANK Anyplace, VA 20000 Official Payments Corporation 1-800-2PAY-TAXSM (1-800-272-9829) 1-877-754-4413 (Customer Service) www.officialpayments.com Link2Gov Corporation 1-888-PAY-1040SM (1-888-729-1040) 1-888-658-5465 (Customer Service) www.PAY1040.com You may need to (a) increase the amount of income tax withTIP held from your pay by filing a new Form W-4, or (b) make estimated tax payments for 2005. See Income Tax Withholding and Estimated Tax Payments for 2005 on page 57. What If You Cannot Pay? If you cannot pay the full amount shown on line 74 when you file, you can ask to make monthly installment payments for the full or a partial amount. You may have up to 60 months to pay. However, you will be charged interest and may be charged a late payment penalty on the tax not paid by April 15, 2005, even if your request to pay in installments is granted. You must also pay a fee. To limit the interest and penalty charges, pay as much of the tax as possible when you file. But before requesting an installment agreement, you should consider other less costly alternatives, such as a bank loan or credit card payment. To ask for an installment agreement, use Form 9465. You should receive a response to your request for installments within 30 days. But if you file your return after March 31, it may take us longer to reply. $ Routing number Account number (line 72b) (line 72d) "’86". 1234 Line 75 DOLLARS Estimated Tax Penalty Do not include the check number. 䊲 For |:250250025|:202020 service provider 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 you will have the option to either continue or cancel the transaction. You can also find out what the fee will be by calling the provider’s toll-free automated customer service number or visiting the provider’s website shown below. If you pay by credit card before filing your return, please enter on page 1 of Form 1040 in the upper left corner the confirmation number you were given at the end of the transaction and the amount you charged (not including the convenience fee). The routing and account numbers may be in different places on your check. You may owe this penalty if: • Line 74 is at least $1,000 and it is more than 10% of the tax shown on your return, or • You did not pay enough estimated tax by any of the due dates. This is true even if CAUTION - 55 - Need more information or forms? See page 7. Page 56 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Form 1040 — Line 75 you are due a refund. For most people, the “tax shown on your return” is the amount on line 62 minus the total of any amounts shown on lines 65a and 67 and Forms 8828, 4137, 4136, 5329 (Parts III through VIII only), and 8885. When figuring the amount on line 62, include the amount on line 61 only if line 63 is more than zero or you would owe the penalty even if you did not include those taxes. But if you entered an amount on Schedule H, line 7, include the total of that amount plus the amount on Form 1040, line 61. Exception. You will not owe the penalty if your 2003 tax return was for a tax year of 12 full months and either of the following applies. 1. You had no tax liability for 2003 and you were a U.S. citizen or resident for all of 2003, or 2. The total of lines 63, 64, and 66 on your 2004 return is at least as much as the tax liability shown on your 2003 return. Your estimated tax payments for 2004 must have been made on time and for the required amount. If your 2003 adjusted gross income was over $150,000 (over $75,000 if your 2004 filing staCAUTION tus is married filing separately), item 2 above applies only if the total of lines 63, 64, and 66 on your 2004 return is at least 110% of the tax liability shown on your 2003 return. This rule does not apply to farmers and fishermen. ! Figuring the Penalty If the Exception above does not apply and you choose to figure the penalty yourself, see Form 2210 (or 2210-F for farmers and fishermen) to find out if you owe the penalty. If you do, you can use the form to figure the amount. Enter the penalty on line 75. Add the penalty to any tax due and enter the total on line 74. If you are due a refund, subtract the penalty from the overpayment you show on line 71. Do not file Form 2210 with your return unless Form 2210 indicates that you must do so. Instead, keep it for your records. Because Form 2210 is complicated, if you want to, you can TIP leave line 75 blank and the IRS will figure the penalty and send you a bill. We will not charge you interest on the penalty if you pay by the date specified on the bill. If your income varied during the year, the annualized income installment method may reduce the amount of your penalty. But you must file Form 2210 because the IRS cannot figure your penalty under this method. See the Instructions for Form 2210 for other situations in which you may be able to lower your penalty by filing Form 2210. return as a surviving spouse, see Death of a Taxpayer on page 58. Child’s Return Third Party Designee If you want to allow a friend, family member, or any other person you choose to discuss your 2004 tax return with the IRS, check the “Yes” box in the “Third Party Designee” area of your return. Also, enter the designee’s name, phone number, and any five digits the designee chooses as his or her personal identification number (PIN). But 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. You do not have to provide the other information requested. If you check the “Yes” box, you, and your spouse if filing a joint return, are authorizing the IRS to call the designee to answer any questions that may arise during the processing of your return. You are also authorizing the designee to: • Give the IRS any information that is missing from your return, • Call the IRS for information about the processing of your return or the status of your refund or payment(s), • Receive copies of notices or transcripts related to your return, upon request, and • Respond to certain IRS notices about math errors, offsets, and return preparation. You are not authorizing the designee to receive any refund check, bind you to anything (including any additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee’s authorization, see Pub. 947. The authorization will automatically end no later than the due date (without regard to extensions) for filing your 2005 tax return. This is April 17, 2006, for most people. If you wish to revoke the authorization before it ends, see Pub. 947. Sign Your Return Form 1040 is not considered a valid return unless you sign it. If you are filing a joint return, your spouse must also sign. If your spouse cannot sign the return, see Pub. 501. Be sure to date your return and enter your occupation(s). If you have someone prepare your return, you are still responsible for the correctness of the return. If your return is signed by a representative for you, you must have a power of attorney attached that specifically authorizes the representative to sign your return. To do this, you can use Form 2848. If you are filing a joint Need more information or forms? See page 7. - 56 - If your child cannot sign the return, either parent can sign the child’s name in the space provided. Then, add “By (your signature), parent for minor child.” Daytime Phone Number Providing your daytime phone number may help speed the processing of your return. We may have questions about items on your return, such as the earned income credit, credit for child and dependent care expenses, etc. By answering our questions over the phone, we may be able to continue processing your return without mailing you a letter. If you are filing a joint return, you may enter either your or your spouse’s daytime phone number. Paid Preparer Must Sign Your Return Generally, anyone you pay to prepare your return must sign it in the space provided. The preparer must give you a copy of the return for your records. Someone who prepares your return but does not charge you should not sign your return. Electronic Return Signatures! Create your own personal identification number (PIN) and file a paperless return electronically or use a tax professional. 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 digits you choose 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 prompted to enter your adjusted gross income (AGI) from your originally filed 2003 federal income tax return, if applicable. Do not use your AGI from an amended return (Form 1040X), a math error notice, or an IRS examination report. AGI is the amount shown on your 2003 Form 1040, line 35; Form 1040A, line 22; Form 1040EZ, line 4; or on the TeleFile Tax Record, line I. If you do not have your 2003 income tax return, call the IRS at 1-800-829-1040 to get a free transcript of your return. You will also be prompted 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. Page 57 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. You cannot sign your return electronically if you are a first-time filer under age 16 at CAUTION the end of 2004 or if you are filing certain forms, such as Form 3115, 3468 (if attachments are required), 5713, 8283 (if Section B is completed), 8332, 8858, or 8885. For more details, visit www.irs.gov/efile and click on “e-file for Individual Taxpayers.” 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 or Form 8453-OL, whichever applies If you use a paid preparer, ask to sign your return electronically! Assemble Your Return quence No.” shown in the upper right corner of the schedule or form. If you have supporting statements, arrange them in the same order as the schedules or forms they support and attach them last. Do not attach correspondence or other items unless required to do so. Attach a copy of Forms W-2 and 2439 to the front of Form 1040. Also attach Forms W-2G and 1099-R to the front of Form 1040 if tax was withheld. Assemble any schedules and forms behind Form 1040 in order of the “Attachment Se- General Information How To Avoid Common Mistakes Mistakes may delay your refund or result in notices being sent to you. • Make sure you entered the correct name and social security number (SSN) for each dependent you claim on line 6c. Check that each dependent’s name and SSN agrees with his or her social security card. Also, make sure you check the box in line 6c, column (4), for each dependent under age 17 who is also a qualifying child for the child tax credit. • Check your math, especially for the child tax credit, earned income credit (EIC), taxable social security benefits, total income, itemized deductions or standard deduction, deduction for exemptions, taxable income, total tax, federal income tax withheld, and refund or amount you owe. • Be sure you use the correct method to figure your tax. See the instructions for line 43 that begin on page 33. • Be sure to enter your SSN in the space provided on page 1 of Form 1040. If you are married filing a joint or separate return, also enter your spouse’s SSN. Be sure to enter your SSN in the space next to your name. Check that your name and SSN agree with your social security card. • Make sure your name and address are correct on the peel-off label. If not, enter the correct information. If you did not get a peel-off label, enter your (and your spouse’s) name in the same order as shown on your last return. Check that your name agrees with your social security card. • If you are taking the standard deduction and you checked any box on line 38a or 38b or you (or your spouse if filing jointly) can be claimed as a dependent on someone else’s 2004 return, see page 31 to be sure you entered the correct amount on line 39. • If you received capital gain distributions but were not required to file Schedule D, make sure you checked the box on line 13. • If you are taking the EIC, be sure you used the correct column of the EIC Table for your filing status and the number of children you have. • Remember to sign and date Form 1040 and enter your occupation(s). • Attach your Form(s) W-2 and other required forms and schedules. Put all forms and schedules in the proper order. See Assemble Your Return above. • If you owe tax and are paying by check or money order, be sure to include all the required information on your payment. See the instructions for line 74 on page 55 for details. What Are Your Rights as a Taxpayer? You have the right to be treated fairly, professionally, promptly, and courteously by IRS employees. Our goal at the IRS is to protect your rights so that you will have the highest confidence in the integrity, efficiency, and fairness of our tax system. To ensure that you always receive such treatment, you should know about the many rights you have at each step of the tax process. For details, see Pub. 1. - 57 - Innocent Spouse Relief You may qualify for relief from liability for tax on a joint return if (a) there is an understatement of tax because your spouse omitted income or claimed false deductions or credits, (b) you are divorced, separated, or no longer living with your spouse, or (c) given all the facts and circumstances, it would not be fair to hold you liable for the tax. See Form 8857 or Pub. 971 for more details. Income Tax Withholding and Estimated Tax Payments for 2005 If the amount you owe or the amount you overpaid is large, you may want to file a new Form W-4 with your employer to change the amount of income tax withheld from your 2005 pay. For details on how to complete Form W-4, see Pub. 919. In general, you do not have to make estimated tax payments if you expect that your 2005 Form 1040 will show a tax refund or a tax balance due of less than $1,000. If your total estimated tax (including any household employment taxes or alternative minimum tax) for 2005 is $1,000 or more, see Form 1040-ES. It has a worksheet you can use to see if you have to make estimated tax payments. For more details, see Pub. 505. Page 58 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Do Both the Name and SSN on Your Tax Forms Agree With Your Social Security Card? If not, certain deductions and credits may be reduced or disallowed, your refund may be delayed, and you may not receive credit for your social security earnings. If your Form W-2, Form 1099, or other tax document shows an incorrect SSN or name, notify your employer or the form-issuing agent as soon as possible to make sure your earnings are credited to your social security record. If the name or SSN on your social security card is incorrect, call the Social Security Administration at 1-800-772-1213. How Do You Make a Gift To Reduce Debt Held By the Public? If you wish to do so, make a check payable to “Bureau of the Public Debt.” You can send it to: Bureau of the Public Debt, Department G, P.O. Box 2188, Parkersburg, WV 26106-2188. Or you can enclose the check with your income tax return when you file. Do not add your gift to any tax you may owe. See page 55 for details on how to pay any tax you owe. TIP You may be able to deduct this gift on your 2005 tax return. How Long Should Records Be Kept? Keep a copy of your tax return, worksheets you used, and records of all items appearing on it (such as Forms W-2 and 1099) until the statute of limitations runs out for that return. Usually, this is 3 years from the date the return was due or filed, or 2 years from the date the tax was paid, whichever is later. You should keep some records longer. For example, keep property records (including those on your home) as long as they are needed to figure the basis of the original or replacement property. For more details, see Pub. 552. Amended Return File Form 1040X to change a return you already filed. Generally, Form 1040X must be filed within 3 years after the date the original return was filed, or within 2 years after the date the tax was paid, whichever is later. But you may have more time to file Form 1040X if you are physically or men- tally unable to manage your financial affairs. See Pub. 556 for details. Need a Copy of Your Tax Return? If you need a copy of your tax return, use Form 4506. There is a $39 fee for each return requested. If you want a free transcript of your tax return or account, use Form 4506-T or call us. See page 10 for the number. Death of a Taxpayer If a taxpayer died before filing a return for 2004, the taxpayer’s spouse or personal representative may have to file and sign a return for that taxpayer. A personal representative can be an executor, administrator, or anyone who is in charge of the deceased taxpayer’s property. If the deceased taxpayer did not have to file a return but had tax withheld, a return must be filed to get a refund. The person who files the return must enter “Deceased,” the deceased taxpayer’s name, and the date of death across the top of the return. If this information is not provided, it may delay the processing of the return. If your spouse died in 2004 and you did not remarry in 2004, or if your spouse died in 2005 before filing a return for 2004, you can file a joint return. A joint return should show your spouse’s 2004 income before death and your income for all of 2004. Enter “Filing as surviving spouse” in the area where you sign the return. If someone else is the personal representative, he or she must also sign. The surviving spouse or personal representative should promptly notify all payers of income, including financial institutions, of the taxpayer’s death. This will ensure the proper reporting of income earned by the taxpayer’s estate or heirs. A deceased taxpayer’s social security number should not be used for tax years after the year of death, except for estate tax return purposes. Claiming a Refund for a Deceased Taxpayer If you are filing a joint return as a surviving spouse, you only need to file the tax return to claim the refund. If you are a court-appointed representative, file the return and attach a copy of the certificate that shows your appointment. All other filers requesting the deceased taxpayer’s refund must file the return and attach Form 1310. For more details, use TeleTax topic 356 (see page 8) or see Pub. 559. - 58 - Parent of a Kidnapped Child The parent of a child who is presumed by law enforcement authorities to have been kidnapped by someone who is not a family member may be able to take the child into account in determining his or her eligibility for the head of household or qualifying widow(er) filing status, deduction for dependents, child tax credit, and the earned income credit (EIC). For details, use TeleTax topic 357 (see page 8) or see Pub. 501 (Pub. 596 for the EIC). Other Ways To Get Help Send Your Written Tax Questions to the IRS You should get an answer in about 30 days. If you do not have the mailing address, call us. See page 10 for the number. Do not send questions with your return. Research Your Tax Questions Online You can find answers to many of your tax questions online in several ways by accessing the IRS website at www.irs.gov/help and then clicking on “Help With Tax Questions.” Here are some of the methods you may want to try. • Frequently asked questions. This section contains an extensive list of questions and answers. You may select your question by category or keyword. • Tax trails. This is an interactive section which asks questions you can answer by selecting “Yes” or “No.” • Tax topics. This section provides a broad picture of tax topics beginning with 17 main categories. Each topic link leads to further categories and then to a discussion of the topic. Free Help With Your Return Free help in preparing your return is available nationwide from IRS-sponsored 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. If you are a member of the military, you can also get assistance on military tax benefits, such as combat zone tax benefits, at an office within your installation. For more information on these programs, go to www.irs.gov and enter keyword “VITA” in the upper right corner. Or, call us. See page 10 for the number. To find the nearest AARP Tax-Aide site, visit AARP’s web- Page 59 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. site at www.aarp.org/taxaide or call 1-888-227-7669. When you go for help, take your photo ID and social security numbers (or individual taxpayer identification numbers) for your spouse, your dependents, and yourself. Also take a copy of your 2003 tax return (if available), all your Forms W-2 and 1099 for 2004, and any other information about your 2004 income and expenses. Everyday Tax Solutions You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under “United States Government, Internal Revenue Service.” Online Services If you subscribe to an online service, ask about online filing or tax information. Large-Print Forms and Instructions Pub. 1614 has large-print copies of Form 1040, Schedules A, B, D, E, and R, and Form 1040-V, and their instructions. You can use the large-print forms and schedules as worksheets to figure your tax, but you cannot file them. You can get Pub. 1614 by phone or mail. See pages 7 and 73. 1-800-829-4059. Braille materials are available at libraries that have special services for people with disabilities. Interest and Penalties You do not have to figure the amount of any interest or penalties you may owe. Because figuring these amounts can be complicated, we will do it for you if you want. We will send you a bill for any amount due. If you include interest or penalties (other than the estimated tax penalty) with your payment, identify and enter the amount in the bottom margin of Form 1040, page 2. Do not include interest or penalties (other than the estimated tax penalty) in the amount you owe on line 74. Interest We will charge you interest on taxes not paid by their due date, even if an extension of time to file is granted. We will also charge you interest on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, and substantial understatements of tax. Interest is charged on the penalty from the due date of the return (including extensions). Penalties Late filing. If you do not file your return by the due date (including extensions), the penalty is usually 5% of the amount due for Help for People With Disabilities Telephone help is available using TTY/ TDD equipment by calling - 59 - each month or part of a month your return is late, unless you have a reasonable explanation. If you do, attach it to your return. The penalty can be as much as 25% (more in some cases) of the tax due. If your return is more than 60 days late, the minimum penalty will be $100 or the amount of any tax you owe, whichever is smaller. Late payment of tax. If you pay your taxes late, the penalty is usually 1⁄2 of 1% of the unpaid amount for each month or part of a month the tax is not paid. The penalty can be as much as 25% of the unpaid amount. It applies to any unpaid tax on the return. This penalty is in addition to interest charges on late payments. Frivolous return. In addition to any other penalties, the law imposes a penalty of $500 for filing a frivolous return. A frivolous return is one that does not contain information needed to figure the correct tax or shows a substantially incorrect tax because you take a frivolous position or desire to delay or interfere with the tax laws. This includes altering or striking out the preprinted language above the space where you sign. Other. Other penalties can be imposed for negligence, substantial understatement of tax, and fraud. Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. See Pub. 17 for details on some of these penalties. Page 60 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table If line 42 (taxable income) is— At least But less than CAUTION If line 42 (taxable income) is— Married filing separately Head At of a least household But less than Single Married filing jointly * 5 15 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500 525 550 575 600 625 650 675 700 725 750 775 800 825 850 875 900 925 950 975 1,000 0 1 2 4 6 9 11 14 16 19 21 24 26 29 31 34 36 39 41 44 46 49 51 54 56 59 61 64 66 69 71 74 76 79 81 84 86 89 91 94 96 99 0 1 2 4 6 9 11 14 16 19 21 24 26 29 31 34 36 39 41 44 46 49 51 54 56 59 61 64 66 69 71 74 76 79 81 84 86 89 91 94 96 99 0 1 2 4 6 9 11 14 16 19 21 24 26 29 31 34 36 39 41 44 46 49 51 54 56 59 61 64 66 69 71 74 76 79 81 84 86 89 91 94 96 99 0 1 2 4 6 9 11 14 16 19 21 24 26 29 31 34 36 39 41 44 46 49 51 54 56 59 61 64 66 69 71 74 76 79 81 84 86 89 91 94 96 99 101 104 106 109 111 114 116 119 121 124 126 129 101 104 106 109 111 114 116 119 121 124 126 129 101 104 106 109 111 114 116 119 121 124 126 129 101 104 106 109 111 114 116 119 121 124 126 129 1,000 1,000 1,025 1,050 1,075 1,100 1,125 1,150 1,175 1,200 1,225 1,250 1,275 1,025 1,050 1,075 1,100 1,125 1,150 1,175 1,200 1,225 1,250 1,275 1,300 1,300 1,325 1,350 1,375 1,400 1,425 1,450 1,475 1,500 1,525 1,550 1,575 1,600 1,625 1,650 1,675 1,700 1,725 1,750 1,775 1,800 1,825 1,850 1,875 1,900 1,925 1,950 1,975 1,325 1,350 1,375 1,400 1,425 1,450 1,475 1,500 1,525 1,550 1,575 1,600 1,625 1,650 1,675 1,700 1,725 1,750 1,775 1,800 1,825 1,850 1,875 1,900 1,925 1,950 1,975 2,000 131 134 136 139 141 144 146 149 151 154 156 159 161 164 166 169 171 174 176 179 181 184 186 189 191 194 196 199 Married filing separately Your tax 131 134 136 139 141 144 146 149 151 154 156 159 161 164 166 169 171 174 176 179 181 184 186 189 191 194 196 199 2,025 2,050 2,075 2,100 2,125 2,150 2,175 2,200 2,225 2,250 2,275 2,300 2,325 2,350 2,375 2,400 2,425 2,450 2,475 2,500 2,525 2,550 2,575 2,600 2,625 2,650 2,675 2,700 201 204 206 209 211 214 216 219 221 224 226 229 231 234 236 239 241 244 246 249 251 254 256 259 261 264 266 269 201 204 206 209 211 214 216 219 221 224 226 229 231 234 236 239 241 244 246 249 251 254 256 259 261 264 266 269 * This column must also be used by a qualifying widow(er). - 60 - 25,200 25,250 25,300 25,350 Head At of a least household is— 131 134 136 139 141 144 146 149 151 154 156 159 161 164 166 169 171 174 176 179 181 184 186 189 191 194 196 199 131 134 136 139 141 144 146 149 151 154 156 159 161 164 166 169 171 174 176 179 181 184 186 189 191 194 196 199 201 204 206 209 211 214 216 219 221 224 226 229 231 234 236 239 241 244 246 249 251 254 256 259 261 264 266 269 201 204 206 209 211 214 216 219 221 224 226 229 231 234 236 239 241 244 246 249 251 254 256 259 261 264 266 269 2,000 2,000 2,025 2,050 2,075 2,100 2,125 2,150 2,175 2,200 2,225 2,250 2,275 2,300 2,325 2,350 2,375 2,400 2,425 2,450 2,475 2,500 2,525 2,550 2,575 2,600 2,625 2,650 2,675 But less than 25,250 25,300 25,350 25,400 Single Married filing jointly * 3,426 3,434 3,441 3,449 If line 42 (taxable income) is— And you are— Your tax is— 0 5 15 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500 525 550 575 600 625 650 675 700 725 750 775 800 825 850 875 900 925 950 975 At least Example. Mr. and Mrs. Brown are filing a joint return. Their taxable income on Form 1040, line 42, is $25,300. First, they find the $25,300–25,350 taxable income line. Next, they find the column for married filing jointly and read down the column. The amount shown where the taxable income line and filing status column meet is $3,084. This is the tax amount they should enter on Form 1040, line 43. And you are— Single Married filing jointly * Sample Table See the instructions for line 43 that begin on page 33 to see if you must use the Tax Table below to figure your tax. 2,700 2,725 2,750 2,775 2,800 2,825 2,850 2,875 2,900 2,925 2,950 2,975 But less than 2,725 2,750 2,775 2,800 2,825 2,850 2,875 2,900 2,925 2,950 2,975 3,000 Married filing separately Head of a household Your tax is— 3,069 3,426 3,076 3,434 3,084 3,441 3,091 3,449 3,274 3,281 3,289 3,296 And you are— Single Married filing jointly * Married filing separately Head of a household Your tax is— 271 271 271 274 274 274 276 276 276 279 279 279 281 281 281 284 284 284 286 286 286 289 289 289 291 291 291 294 294 294 296 296 296 299 299 299 271 274 276 279 281 284 286 289 291 294 296 299 303 308 313 318 323 328 333 338 343 348 353 358 363 368 373 378 383 388 393 398 303 308 313 318 323 328 333 338 343 348 353 358 363 368 373 378 383 388 393 398 303 308 313 318 323 328 333 338 343 348 353 358 363 368 373 378 383 388 393 398 303 308 313 318 323 328 333 338 343 348 353 358 363 368 373 378 383 388 393 398 403 408 413 418 423 428 433 438 443 448 453 458 463 468 473 478 483 488 493 498 403 408 413 418 423 428 433 438 443 448 453 458 463 468 473 478 483 488 493 498 403 408 413 418 423 428 433 438 443 448 453 458 463 468 473 478 483 488 493 498 403 408 413 418 423 428 433 438 443 448 453 458 463 468 473 478 483 488 493 498 3,000 3,000 3,050 3,100 3,150 3,200 3,250 3,300 3,350 3,400 3,450 3,500 3,550 3,600 3,650 3,700 3,750 3,800 3,850 3,900 3,950 3,050 3,100 3,150 3,200 3,250 3,300 3,350 3,400 3,450 3,500 3,550 3,600 3,650 3,700 3,750 3,800 3,850 3,900 3,950 4,000 4,000 4,000 4,050 4,100 4,150 4,200 4,250 4,300 4,350 4,400 4,450 4,500 4,550 4,600 4,650 4,700 4,750 4,800 4,850 4,900 4,950 4,050 4,100 4,150 4,200 4,250 4,300 4,350 4,400 4,450 4,500 4,550 4,600 4,650 4,700 4,750 4,800 4,850 4,900 4,950 5,000 (Continued on page 61) Page 61 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 5,000 Married filing jointly * Married filing separately Head of a household Your tax is— 8,000 11,000 5,000 5,050 5,100 5,150 5,050 5,100 5,150 5,200 503 508 513 518 503 508 513 518 503 508 513 518 503 508 513 518 8,000 8,050 8,100 8,150 8,050 8,100 8,150 8,200 846 854 861 869 803 808 813 818 846 854 861 869 803 808 813 818 11,000 11,050 11,100 11,150 11,050 11,100 11,150 11,200 1,296 1,304 1,311 1,319 1,103 1,108 1,113 1,118 1,296 1,304 1,311 1,319 1,144 1,151 1,159 1,166 5,200 5,250 5,300 5,350 5,250 5,300 5,350 5,400 523 528 533 538 523 528 533 538 523 528 533 538 523 528 533 538 8,200 8,250 8,300 8,350 8,250 8,300 8,350 8,400 876 884 891 899 823 828 833 838 876 884 891 899 823 828 833 838 11,200 11,250 11,300 11,350 11,250 11,300 11,350 11,400 1,326 1,334 1,341 1,349 1,123 1,128 1,133 1,138 1,326 1,334 1,341 1,349 1,174 1,181 1,189 1,196 5,400 5,450 5,500 5,550 5,450 5,500 5,550 5,600 543 548 553 558 543 548 553 558 543 548 553 558 543 548 553 558 8,400 8,450 8,500 8,550 8,450 8,500 8,550 8,600 906 914 921 929 843 848 853 858 906 914 921 929 843 848 853 858 11,400 11,450 11,500 11,550 11,450 11,500 11,550 11,600 1,356 1,364 1,371 1,379 1,143 1,148 1,153 1,158 1,356 1,364 1,371 1,379 1,204 1,211 1,219 1,226 5,600 5,650 5,700 5,750 5,650 5,700 5,750 5,800 563 568 573 578 563 568 573 578 563 568 573 578 563 568 573 578 8,600 8,650 8,700 8,750 8,650 8,700 8,750 8,800 936 944 951 959 863 868 873 878 936 944 951 959 863 868 873 878 11,600 11,650 11,700 11,750 11,650 11,700 11,750 11,800 1,386 1,394 1,401 1,409 1,163 1,168 1,173 1,178 1,386 1,394 1,401 1,409 1,234 1,241 1,249 1,256 5,800 5,850 5,900 5,950 5,850 5,900 5,950 6,000 583 588 593 598 583 588 593 598 583 588 593 598 583 588 593 598 8,800 8,850 8,900 8,950 8,850 8,900 8,950 9,000 966 974 981 989 883 888 893 898 966 974 981 989 883 888 893 898 11,800 11,850 11,900 11,950 11,850 11,900 11,950 12,000 1,416 1,424 1,431 1,439 1,183 1,188 1,193 1,198 1,416 1,424 1,431 1,439 1,264 1,271 1,279 1,286 6,000 9,000 12,000 6,000 6,050 6,100 6,150 6,050 6,100 6,150 6,200 603 608 613 618 603 608 613 618 603 608 613 618 603 608 613 618 9,000 9,050 9,100 9,150 9,050 9,100 9,150 9,200 996 1,004 1,011 1,019 903 908 913 918 996 1,004 1,011 1,019 903 908 913 918 12,000 12,050 12,100 12,150 12,050 12,100 12,150 12,200 1,446 1,454 1,461 1,469 1,203 1,208 1,213 1,218 1,446 1,454 1,461 1,469 1,294 1,301 1,309 1,316 6,200 6,250 6,300 6,350 6,250 6,300 6,350 6,400 623 628 633 638 623 628 633 638 623 628 633 638 623 628 633 638 9,200 9,250 9,300 9,350 9,250 9,300 9,350 9,400 1,026 1,034 1,041 1,049 923 928 933 938 1,026 1,034 1,041 1,049 923 928 933 938 12,200 12,250 12,300 12,350 12,250 12,300 12,350 12,400 1,476 1,484 1,491 1,499 1,223 1,228 1,233 1,238 1,476 1,484 1,491 1,499 1,324 1,331 1,339 1,346 6,400 6,450 6,500 6,550 6,450 6,500 6,550 6,600 643 648 653 658 643 648 653 658 643 648 653 658 643 648 653 658 9,400 9,450 9,500 9,550 9,450 9,500 9,550 9,600 1,056 1,064 1,071 1,079 943 948 953 958 1,056 1,064 1,071 1,079 943 948 953 958 12,400 12,450 12,500 12,550 12,450 12,500 12,550 12,600 1,506 1,514 1,521 1,529 1,243 1,248 1,253 1,258 1,506 1,514 1,521 1,529 1,354 1,361 1,369 1,376 6,600 6,650 6,700 6,750 6,650 6,700 6,750 6,800 663 668 673 678 663 668 673 678 663 668 673 678 663 668 673 678 9,600 9,650 9,700 9,750 9,650 9,700 9,750 9,800 1,086 1,094 1,101 1,109 963 968 973 978 1,086 1,094 1,101 1,109 963 968 973 978 12,600 12,650 12,700 12,750 12,650 12,700 12,750 12,800 1,536 1,544 1,551 1,559 1,263 1,268 1,273 1,278 1,536 1,544 1,551 1,559 1,384 1,391 1,399 1,406 6,800 6,850 6,900 6,950 6,850 6,900 6,950 7,000 683 688 693 698 683 688 693 698 683 688 693 698 683 688 693 698 9,800 9,850 9,850 9,900 9,900 9,950 9,950 10,000 1,116 1,124 1,131 1,139 983 988 993 998 1,116 1,124 1,131 1,139 983 988 993 998 12,800 12,850 12,900 12,950 12,850 12,900 12,950 13,000 1,566 1,574 1,581 1,589 1,283 1,288 1,293 1,298 1,566 1,574 1,581 1,589 1,414 1,421 1,429 1,436 7,000 10,000 13,000 7,000 7,050 7,100 7,150 7,050 7,100 7,150 7,200 703 708 713 719 703 708 713 718 703 708 713 719 703 708 713 718 10,000 10,050 10,100 10,150 10,050 10,100 10,150 10,200 1,146 1,154 1,161 1,169 1,003 1,008 1,013 1,018 1,146 1,154 1,161 1,169 1,003 1,008 1,013 1,018 13,000 13,050 13,100 13,150 13,050 13,100 13,150 13,200 1,596 1,604 1,611 1,619 1,303 1,308 1,313 1,318 1,596 1,604 1,611 1,619 1,444 1,451 1,459 1,466 7,200 7,250 7,300 7,350 7,250 7,300 7,350 7,400 726 734 741 749 723 728 733 738 726 734 741 749 723 728 733 738 10,200 10,250 10,300 10,350 10,250 10,300 10,350 10,400 1,176 1,184 1,191 1,199 1,023 1,028 1,033 1,038 1,176 1,184 1,191 1,199 1,024 1,031 1,039 1,046 13,200 13,250 13,300 13,350 13,250 13,300 13,350 13,400 1,626 1,634 1,641 1,649 1,323 1,328 1,333 1,338 1,626 1,634 1,641 1,649 1,474 1,481 1,489 1,496 7,400 7,450 7,500 7,550 7,450 7,500 7,550 7,600 756 764 771 779 743 748 753 758 756 764 771 779 743 748 753 758 10,400 10,450 10,500 10,550 10,450 10,500 10,550 10,600 1,206 1,214 1,221 1,229 1,043 1,048 1,053 1,058 1,206 1,214 1,221 1,229 1,054 1,061 1,069 1,076 13,400 13,450 13,500 13,550 13,450 13,500 13,550 13,600 1,656 1,664 1,671 1,679 1,343 1,348 1,353 1,358 1,656 1,664 1,671 1,679 1,504 1,511 1,519 1,526 7,600 7,650 7,700 7,750 7,650 7,700 7,750 7,800 786 794 801 809 763 768 773 778 786 794 801 809 763 768 773 778 10,600 10,650 10,700 10,750 10,650 10,700 10,750 10,800 1,236 1,244 1,251 1,259 1,063 1,068 1,073 1,078 1,236 1,244 1,251 1,259 1,084 1,091 1,099 1,106 13,600 13,650 13,700 13,750 13,650 13,700 13,750 13,800 1,686 1,694 1,701 1,709 1,363 1,368 1,373 1,378 1,686 1,694 1,701 1,709 1,534 1,541 1,549 1,556 7,800 7,850 7,900 7,950 7,850 7,900 7,950 8,000 816 824 831 839 783 788 793 798 816 824 831 839 783 788 793 798 10,800 10,850 10,900 10,950 10,850 10,900 10,950 11,000 1,266 1,274 1,281 1,289 1,083 1,088 1,093 1,098 1,266 1,274 1,281 1,289 1,114 1,121 1,129 1,136 13,800 13,850 13,900 13,950 13,850 13,900 13,950 14,000 1,716 1,724 1,731 1,739 1,383 1,388 1,393 1,398 1,716 1,724 1,731 1,739 1,564 1,571 1,579 1,586 (Continued on page 62) * This column must also be used by a qualifying widow(er). - 61 - Page 62 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 14,000 Married filing jointly * Married filing separately Head of a household Your tax is— 17,000 20,000 14,000 14,050 14,100 14,150 14,050 14,100 14,150 14,200 1,746 1,754 1,761 1,769 1,403 1,408 1,413 1,418 1,746 1,754 1,761 1,769 1,594 1,601 1,609 1,616 17,000 17,050 17,100 17,150 17,050 17,100 17,150 17,200 2,196 2,204 2,211 2,219 1,839 1,846 1,854 1,861 2,196 2,204 2,211 2,219 2,044 2,051 2,059 2,066 20,000 20,050 20,100 20,150 20,050 20,100 20,150 20,200 2,646 2,654 2,661 2,669 2,289 2,296 2,304 2,311 2,646 2,654 2,661 2,669 2,494 2,501 2,509 2,516 14,200 14,250 14,300 14,350 14,250 14,300 14,350 14,400 1,776 1,784 1,791 1,799 1,423 1,428 1,434 1,441 1,776 1,784 1,791 1,799 1,624 1,631 1,639 1,646 17,200 17,250 17,300 17,350 17,250 17,300 17,350 17,400 2,226 2,234 2,241 2,249 1,869 1,876 1,884 1,891 2,226 2,234 2,241 2,249 2,074 2,081 2,089 2,096 20,200 20,250 20,300 20,350 20,250 20,300 20,350 20,400 2,676 2,684 2,691 2,699 2,319 2,326 2,334 2,341 2,676 2,684 2,691 2,699 2,524 2,531 2,539 2,546 14,400 14,450 14,500 14,550 14,450 14,500 14,550 14,600 1,806 1,814 1,821 1,829 1,449 1,456 1,464 1,471 1,806 1,814 1,821 1,829 1,654 1,661 1,669 1,676 17,400 17,450 17,500 17,550 17,450 17,500 17,550 17,600 2,256 2,264 2,271 2,279 1,899 1,906 1,914 1,921 2,256 2,264 2,271 2,279 2,104 2,111 2,119 2,126 20,400 20,450 20,500 20,550 20,450 20,500 20,550 20,600 2,706 2,714 2,721 2,729 2,349 2,356 2,364 2,371 2,706 2,714 2,721 2,729 2,554 2,561 2,569 2,576 14,600 14,650 14,700 14,750 14,650 14,700 14,750 14,800 1,836 1,844 1,851 1,859 1,479 1,486 1,494 1,501 1,836 1,844 1,851 1,859 1,684 1,691 1,699 1,706 17,600 17,650 17,700 17,750 17,650 17,700 17,750 17,800 2,286 2,294 2,301 2,309 1,929 1,936 1,944 1,951 2,286 2,294 2,301 2,309 2,134 2,141 2,149 2,156 20,600 20,650 20,700 20,750 20,650 20,700 20,750 20,800 2,736 2,744 2,751 2,759 2,379 2,386 2,394 2,401 2,736 2,744 2,751 2,759 2,584 2,591 2,599 2,606 14,800 14,850 14,900 14,950 14,850 14,900 14,950 15,000 1,866 1,874 1,881 1,889 1,509 1,516 1,524 1,531 1,866 1,874 1,881 1,889 1,714 1,721 1,729 1,736 17,800 17,850 17,900 17,950 17,850 17,900 17,950 18,000 2,316 2,324 2,331 2,339 1,959 1,966 1,974 1,981 2,316 2,324 2,331 2,339 2,164 2,171 2,179 2,186 20,800 20,850 20,900 20,950 20,850 20,900 20,950 21,000 2,766 2,774 2,781 2,789 2,409 2,416 2,424 2,431 2,766 2,774 2,781 2,789 2,614 2,621 2,629 2,636 15,000 18,000 21,000 15,000 15,050 15,100 15,150 15,050 15,100 15,150 15,200 1,896 1,904 1,911 1,919 1,539 1,546 1,554 1,561 1,896 1,904 1,911 1,919 1,744 1,751 1,759 1,766 18,000 18,050 18,100 18,150 18,050 18,100 18,150 18,200 2,346 2,354 2,361 2,369 1,989 1,996 2,004 2,011 2,346 2,354 2,361 2,369 2,194 2,201 2,209 2,216 21,000 21,050 21,100 21,150 21,050 21,100 21,150 21,200 2,796 2,804 2,811 2,819 2,439 2,446 2,454 2,461 2,796 2,804 2,811 2,819 2,644 2,651 2,659 2,666 15,200 15,250 15,300 15,350 15,250 15,300 15,350 15,400 1,926 1,934 1,941 1,949 1,569 1,576 1,584 1,591 1,926 1,934 1,941 1,949 1,774 1,781 1,789 1,796 18,200 18,250 18,300 18,350 18,250 18,300 18,350 18,400 2,376 2,384 2,391 2,399 2,019 2,026 2,034 2,041 2,376 2,384 2,391 2,399 2,224 2,231 2,239 2,246 21,200 21,250 21,300 21,350 21,250 21,300 21,350 21,400 2,826 2,834 2,841 2,849 2,469 2,476 2,484 2,491 2,826 2,834 2,841 2,849 2,674 2,681 2,689 2,696 15,400 15,450 15,500 15,550 15,450 15,500 15,550 15,600 1,956 1,964 1,971 1,979 1,599 1,606 1,614 1,621 1,956 1,964 1,971 1,979 1,804 1,811 1,819 1,826 18,400 18,450 18,500 18,550 18,450 18,500 18,550 18,600 2,406 2,414 2,421 2,429 2,049 2,056 2,064 2,071 2,406 2,414 2,421 2,429 2,254 2,261 2,269 2,276 21,400 21,450 21,500 21,550 21,450 21,500 21,550 21,600 2,856 2,864 2,871 2,879 2,499 2,506 2,514 2,521 2,856 2,864 2,871 2,879 2,704 2,711 2,719 2,726 15,600 15,650 15,700 15,750 15,650 15,700 15,750 15,800 1,986 1,994 2,001 2,009 1,629 1,636 1,644 1,651 1,986 1,994 2,001 2,009 1,834 1,841 1,849 1,856 18,600 18,650 18,700 18,750 18,650 18,700 18,750 18,800 2,436 2,444 2,451 2,459 2,079 2,086 2,094 2,101 2,436 2,444 2,451 2,459 2,284 2,291 2,299 2,306 21,600 21,650 21,700 21,750 21,650 21,700 21,750 21,800 2,886 2,894 2,901 2,909 2,529 2,536 2,544 2,551 2,886 2,894 2,901 2,909 2,734 2,741 2,749 2,756 15,800 15,850 15,900 15,950 15,850 15,900 15,950 16,000 2,016 2,024 2,031 2,039 1,659 1,666 1,674 1,681 2,016 2,024 2,031 2,039 1,864 1,871 1,879 1,886 18,800 18,850 18,900 18,950 18,850 18,900 18,950 19,000 2,466 2,474 2,481 2,489 2,109 2,116 2,124 2,131 2,466 2,474 2,481 2,489 2,314 2,321 2,329 2,336 21,800 21,850 21,900 21,950 21,850 21,900 21,950 22,000 2,916 2,924 2,931 2,939 2,559 2,566 2,574 2,581 2,916 2,924 2,931 2,939 2,764 2,771 2,779 2,786 16,000 19,000 22,000 16,000 16,050 16,100 16,150 16,050 16,100 16,150 16,200 2,046 2,054 2,061 2,069 1,689 1,696 1,704 1,711 2,046 2,054 2,061 2,069 1,894 1,901 1,909 1,916 19,000 19,050 19,100 19,150 19,050 19,100 19,150 19,200 2,496 2,504 2,511 2,519 2,139 2,146 2,154 2,161 2,496 2,504 2,511 2,519 2,344 2,351 2,359 2,366 22,000 22,050 22,100 22,150 22,050 22,100 22,150 22,200 2,946 2,954 2,961 2,969 2,589 2,596 2,604 2,611 2,946 2,954 2,961 2,969 2,794 2,801 2,809 2,816 16,200 16,250 16,300 16,350 16,250 16,300 16,350 16,400 2,076 2,084 2,091 2,099 1,719 1,726 1,734 1,741 2,076 2,084 2,091 2,099 1,924 1,931 1,939 1,946 19,200 19,250 19,300 19,350 19,250 19,300 19,350 19,400 2,526 2,534 2,541 2,549 2,169 2,176 2,184 2,191 2,526 2,534 2,541 2,549 2,374 2,381 2,389 2,396 22,200 22,250 22,300 22,350 22,250 22,300 22,350 22,400 2,976 2,984 2,991 2,999 2,619 2,626 2,634 2,641 2,976 2,984 2,991 2,999 2,824 2,831 2,839 2,846 16,400 16,450 16,500 16,550 16,450 16,500 16,550 16,600 2,106 2,114 2,121 2,129 1,749 1,756 1,764 1,771 2,106 2,114 2,121 2,129 1,954 1,961 1,969 1,976 19,400 19,450 19,500 19,550 19,450 19,500 19,550 19,600 2,556 2,564 2,571 2,579 2,199 2,206 2,214 2,221 2,556 2,564 2,571 2,579 2,404 2,411 2,419 2,426 22,400 22,450 22,500 22,550 22,450 22,500 22,550 22,600 3,006 3,014 3,021 3,029 2,649 2,656 2,664 2,671 3,006 3,014 3,021 3,029 2,854 2,861 2,869 2,876 16,600 16,650 16,700 16,750 16,650 16,700 16,750 16,800 2,136 2,144 2,151 2,159 1,779 1,786 1,794 1,801 2,136 2,144 2,151 2,159 1,984 1,991 1,999 2,006 19,600 19,650 19,700 19,750 19,650 19,700 19,750 19,800 2,586 2,594 2,601 2,609 2,229 2,236 2,244 2,251 2,586 2,594 2,601 2,609 2,434 2,441 2,449 2,456 22,600 22,650 22,700 22,750 22,650 22,700 22,750 22,800 3,036 3,044 3,051 3,059 2,679 2,686 2,694 2,701 3,036 3,044 3,051 3,059 2,884 2,891 2,899 2,906 16,800 16,850 16,900 16,950 16,850 16,900 16,950 17,000 2,166 2,174 2,181 2,189 1,809 1,816 1,824 1,831 2,166 2,174 2,181 2,189 2,014 2,021 2,029 2,036 19,800 19,850 19,900 19,950 19,850 19,900 19,950 20,000 2,616 2,624 2,631 2,639 2,259 2,266 2,274 2,281 2,616 2,624 2,631 2,639 2,464 2,471 2,479 2,486 22,800 22,850 22,900 22,950 22,850 22,900 22,950 23,000 3,066 3,074 3,081 3,089 2,709 2,716 2,724 2,731 3,066 3,074 3,081 3,089 2,914 2,921 2,929 2,936 (Continued on page 63) * This column must also be used by a qualifying widow(er). - 62 - Page 63 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— Married filing separately Head of a household Your tax is— 29,000 26,000 23,000 Married filing jointly * 23,000 23,050 23,100 23,150 23,050 23,100 23,150 23,200 3,096 3,104 3,111 3,119 2,739 2,746 2,754 2,761 3,096 3,104 3,111 3,119 2,944 2,951 2,959 2,966 26,000 26,050 26,100 26,150 26,050 26,100 26,150 26,200 3,546 3,554 3,561 3,569 3,189 3,196 3,204 3,211 3,546 3,554 3,561 3,569 3,394 3,401 3,409 3,416 29,000 29,050 29,100 29,150 29,050 29,100 29,150 29,200 3,996 4,006 4,019 4,031 3,639 3,646 3,654 3,661 3,996 4,006 4,019 4,031 3,844 3,851 3,859 3,866 23,200 23,250 23,300 23,350 23,250 23,300 23,350 23,400 3,126 3,134 3,141 3,149 2,769 2,776 2,784 2,791 3,126 3,134 3,141 3,149 2,974 2,981 2,989 2,996 26,200 26,250 26,300 26,350 26,250 26,300 26,350 26,400 3,576 3,584 3,591 3,599 3,219 3,226 3,234 3,241 3,576 3,584 3,591 3,599 3,424 3,431 3,439 3,446 29,200 29,250 29,300 29,350 29,250 29,300 29,350 29,400 4,044 4,056 4,069 4,081 3,669 3,676 3,684 3,691 4,044 4,056 4,069 4,081 3,874 3,881 3,889 3,896 23,400 23,450 23,500 23,550 23,450 23,500 23,550 23,600 3,156 3,164 3,171 3,179 2,799 2,806 2,814 2,821 3,156 3,164 3,171 3,179 3,004 3,011 3,019 3,026 26,400 26,450 26,500 26,550 26,450 26,500 26,550 26,600 3,606 3,614 3,621 3,629 3,249 3,256 3,264 3,271 3,606 3,614 3,621 3,629 3,454 3,461 3,469 3,476 29,400 29,450 29,500 29,550 29,450 29,500 29,550 29,600 4,094 4,106 4,119 4,131 3,699 3,706 3,714 3,721 4,094 4,106 4,119 4,131 3,904 3,911 3,919 3,926 23,600 23,650 23,700 23,750 23,650 23,700 23,750 23,800 3,186 3,194 3,201 3,209 2,829 2,836 2,844 2,851 3,186 3,194 3,201 3,209 3,034 3,041 3,049 3,056 26,600 26,650 26,700 26,750 26,650 26,700 26,750 26,800 3,636 3,644 3,651 3,659 3,279 3,286 3,294 3,301 3,636 3,644 3,651 3,659 3,484 3,491 3,499 3,506 29,600 29,650 29,700 29,750 29,650 29,700 29,750 29,800 4,144 4,156 4,169 4,181 3,729 3,736 3,744 3,751 4,144 4,156 4,169 4,181 3,934 3,941 3,949 3,956 23,800 23,850 23,900 23,950 23,850 23,900 23,950 24,000 3,216 3,224 3,231 3,239 2,859 2,866 2,874 2,881 3,216 3,224 3,231 3,239 3,064 3,071 3,079 3,086 26,800 26,850 26,900 26,950 26,850 26,900 26,950 27,000 3,666 3,674 3,681 3,689 3,309 3,316 3,324 3,331 3,666 3,674 3,681 3,689 3,514 3,521 3,529 3,536 29,800 29,850 29,900 29,950 29,850 29,900 29,950 30,000 4,194 4,206 4,219 4,231 3,759 3,766 3,774 3,781 4,194 4,206 4,219 4,231 3,964 3,971 3,979 3,986 30,000 27,000 24,000 24,000 24,050 24,100 24,150 24,050 24,100 24,150 24,200 3,246 3,254 3,261 3,269 2,889 2,896 2,904 2,911 3,246 3,254 3,261 3,269 3,094 3,101 3,109 3,116 27,000 27,050 27,100 27,150 27,050 27,100 27,150 27,200 3,696 3,704 3,711 3,719 3,339 3,346 3,354 3,361 3,696 3,704 3,711 3,719 3,544 3,551 3,559 3,566 30,000 30,050 30,100 30,150 30,050 30,100 30,150 30,200 4,244 4,256 4,269 4,281 3,789 3,796 3,804 3,811 4,244 4,256 4,269 4,281 3,994 4,001 4,009 4,016 24,200 24,250 24,300 24,350 24,250 24,300 24,350 24,400 3,276 3,284 3,291 3,299 2,919 2,926 2,934 2,941 3,276 3,284 3,291 3,299 3,124 3,131 3,139 3,146 27,200 27,250 27,300 27,350 27,250 27,300 27,350 27,400 3,726 3,734 3,741 3,749 3,369 3,376 3,384 3,391 3,726 3,734 3,741 3,749 3,574 3,581 3,589 3,596 30,200 30,250 30,300 30,350 30,250 30,300 30,350 30,400 4,294 4,306 4,319 4,331 3,819 3,826 3,834 3,841 4,294 4,306 4,319 4,331 4,024 4,031 4,039 4,046 24,400 24,450 24,500 24,550 24,450 24,500 24,550 24,600 3,306 3,314 3,321 3,329 2,949 2,956 2,964 2,971 3,306 3,314 3,321 3,329 3,154 3,161 3,169 3,176 27,400 27,450 27,500 27,550 27,450 27,500 27,550 27,600 3,756 3,764 3,771 3,779 3,399 3,406 3,414 3,421 3,756 3,764 3,771 3,779 3,604 3,611 3,619 3,626 30,400 30,450 30,500 30,550 30,450 30,500 30,550 30,600 4,344 4,356 4,369 4,381 3,849 3,856 3,864 3,871 4,344 4,356 4,369 4,381 4,054 4,061 4,069 4,076 24,600 24,650 24,700 24,750 24,650 24,700 24,750 24,800 3,336 3,344 3,351 3,359 2,979 2,986 2,994 3,001 3,336 3,344 3,351 3,359 3,184 3,191 3,199 3,206 27,600 27,650 27,700 27,750 27,650 27,700 27,750 27,800 3,786 3,794 3,801 3,809 3,429 3,436 3,444 3,451 3,786 3,794 3,801 3,809 3,634 3,641 3,649 3,656 30,600 30,650 30,700 30,750 30,650 30,700 30,750 30,800 4,394 4,406 4,419 4,431 3,879 3,886 3,894 3,901 4,394 4,406 4,419 4,431 4,084 4,091 4,099 4,106 24,800 24,850 24,900 24,950 24,850 24,900 24,950 25,000 3,366 3,374 3,381 3,389 3,009 3,016 3,024 3,031 3,366 3,374 3,381 3,389 3,214 3,221 3,229 3,236 27,800 27,850 27,900 27,950 27,850 27,900 27,950 28,000 3,816 3,824 3,831 3,839 3,459 3,466 3,474 3,481 3,816 3,824 3,831 3,839 3,664 3,671 3,679 3,686 30,800 30,850 30,900 30,950 30,850 30,900 30,950 31,000 4,444 4,456 4,469 4,481 3,909 3,916 3,924 3,931 4,444 4,456 4,469 4,481 4,114 4,121 4,129 4,136 31,000 28,000 25,000 25,000 25,050 25,100 25,150 25,050 25,100 25,150 25,200 3,396 3,404 3,411 3,419 3,039 3,046 3,054 3,061 3,396 3,404 3,411 3,419 3,244 3,251 3,259 3,266 28,000 28,050 28,100 28,150 28,050 28,100 28,150 28,200 3,846 3,854 3,861 3,869 3,489 3,496 3,504 3,511 3,846 3,854 3,861 3,869 3,694 3,701 3,709 3,716 31,000 31,050 31,100 31,150 31,050 31,100 31,150 31,200 4,494 4,506 4,519 4,531 3,939 3,946 3,954 3,961 4,494 4,506 4,519 4,531 4,144 4,151 4,159 4,166 25,200 25,250 25,300 25,350 25,250 25,300 25,350 25,400 3,426 3,434 3,441 3,449 3,069 3,076 3,084 3,091 3,426 3,434 3,441 3,449 3,274 3,281 3,289 3,296 28,200 28,250 28,300 28,350 28,250 28,300 28,350 28,400 3,876 3,884 3,891 3,899 3,519 3,526 3,534 3,541 3,876 3,884 3,891 3,899 3,724 3,731 3,739 3,746 31,200 31,250 31,300 31,350 31,250 31,300 31,350 31,400 4,544 4,556 4,569 4,581 3,969 3,976 3,984 3,991 4,544 4,556 4,569 4,581 4,174 4,181 4,189 4,196 25,400 25,450 25,500 25,550 25,450 25,500 25,550 25,600 3,456 3,464 3,471 3,479 3,099 3,106 3,114 3,121 3,456 3,464 3,471 3,479 3,304 3,311 3,319 3,326 28,400 28,450 28,500 28,550 28,450 28,500 28,550 28,600 3,906 3,914 3,921 3,929 3,549 3,556 3,564 3,571 3,906 3,914 3,921 3,929 3,754 3,761 3,769 3,776 31,400 31,450 31,500 31,550 31,450 31,500 31,550 31,600 4,594 4,606 4,619 4,631 3,999 4,006 4,014 4,021 4,594 4,606 4,619 4,631 4,204 4,211 4,219 4,226 25,600 25,650 25,700 25,750 25,650 25,700 25,750 25,800 3,486 3,494 3,501 3,509 3,129 3,136 3,144 3,151 3,486 3,494 3,501 3,509 3,334 3,341 3,349 3,356 28,600 28,650 28,700 28,750 28,650 28,700 28,750 28,800 3,936 3,944 3,951 3,959 3,579 3,586 3,594 3,601 3,936 3,944 3,951 3,959 3,784 3,791 3,799 3,806 31,600 31,650 31,700 31,750 31,650 31,700 31,750 31,800 4,644 4,656 4,669 4,681 4,029 4,036 4,044 4,051 4,644 4,656 4,669 4,681 4,234 4,241 4,249 4,256 28,800 28,850 28,850 28,900 28,900 28,950 28,950 29,000 widow(er). 3,966 3,974 3,981 3,989 3,609 3,616 3,624 3,631 3,966 3,974 3,981 3,989 3,814 3,821 3,829 3,836 31,800 31,850 31,900 31,950 31,850 31,900 31,950 32,000 4,694 4,706 4,719 4,731 4,059 4,066 4,074 4,081 4,694 4,706 4,719 4,731 4,264 4,271 4,279 4,286 25,800 25,850 3,516 25,850 25,900 3,524 25,900 25,950 3,531 25,950 26,000 3,539 * This column must also 3,159 3,166 3,174 3,181 be used 3,516 3,364 3,524 3,371 3,531 3,379 3,539 3,386 by a qualifying (Continued on page 64) - 63 - Page 64 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— Married filing separately Head of a household Your tax is— 35,000 32,000 Married filing jointly * 38,000 32,000 32,050 32,100 32,150 32,050 32,100 32,150 32,200 4,744 4,756 4,769 4,781 4,089 4,096 4,104 4,111 4,744 4,756 4,769 4,781 4,294 4,301 4,309 4,316 35,000 35,050 35,100 35,150 35,050 35,100 35,150 35,200 5,494 5,506 5,519 5,531 4,539 4,546 4,554 4,561 5,494 5,506 5,519 5,531 4,744 4,751 4,759 4,766 38,000 38,050 38,100 38,150 38,050 38,100 38,150 38,200 6,244 6,256 6,269 6,281 4,989 4,996 5,004 5,011 6,244 6,256 6,269 6,281 5,194 5,201 5,209 5,216 32,200 32,250 32,300 32,350 32,250 32,300 32,350 32,400 4,794 4,806 4,819 4,831 4,119 4,126 4,134 4,141 4,794 4,806 4,819 4,831 4,324 4,331 4,339 4,346 35,200 35,250 35,300 35,350 35,250 35,300 35,350 35,400 5,544 5,556 5,569 5,581 4,569 4,576 4,584 4,591 5,544 5,556 5,569 5,581 4,774 4,781 4,789 4,796 38,200 38,250 38,300 38,350 38,250 38,300 38,350 38,400 6,294 6,306 6,319 6,331 5,019 5,026 5,034 5,041 6,294 6,306 6,319 6,331 5,224 5,231 5,239 5,246 32,400 32,450 32,500 32,550 32,450 32,500 32,550 32,600 4,844 4,856 4,869 4,881 4,149 4,156 4,164 4,171 4,844 4,856 4,869 4,881 4,354 4,361 4,369 4,376 35,400 35,450 35,500 35,550 35,450 35,500 35,550 35,600 5,594 5,606 5,619 5,631 4,599 4,606 4,614 4,621 5,594 5,606 5,619 5,631 4,804 4,811 4,819 4,826 38,400 38,450 38,500 38,550 38,450 38,500 38,550 38,600 6,344 6,356 6,369 6,381 5,049 5,056 5,064 5,071 6,344 6,356 6,369 6,381 5,254 5,261 5,269 5,276 32,600 32,650 32,700 32,750 32,650 32,700 32,750 32,800 4,894 4,906 4,919 4,931 4,179 4,186 4,194 4,201 4,894 4,906 4,919 4,931 4,384 4,391 4,399 4,406 35,600 35,650 35,700 35,750 35,650 35,700 35,750 35,800 5,644 5,656 5,669 5,681 4,629 4,636 4,644 4,651 5,644 5,656 5,669 5,681 4,834 4,841 4,849 4,856 38,600 38,650 38,700 38,750 38,650 38,700 38,750 38,800 6,394 6,406 6,419 6,431 5,079 5,086 5,094 5,101 6,394 6,406 6,419 6,431 5,284 5,291 5,299 5,306 32,800 32,850 32,900 32,950 32,850 32,900 32,950 33,000 4,944 4,956 4,969 4,981 4,209 4,216 4,224 4,231 4,944 4,956 4,969 4,981 4,414 4,421 4,429 4,436 35,800 35,850 35,900 35,950 35,850 35,900 35,950 36,000 5,694 5,706 5,719 5,731 4,659 4,666 4,674 4,681 5,694 5,706 5,719 5,731 4,864 4,871 4,879 4,886 38,800 38,850 38,900 38,950 38,850 38,900 38,950 39,000 6,444 6,456 6,469 6,481 5,109 5,116 5,124 5,131 6,444 6,456 6,469 6,481 5,314 5,321 5,331 5,344 33,000 39,000 36,000 33,000 33,050 33,100 33,150 33,050 33,100 33,150 33,200 4,994 5,006 5,019 5,031 4,239 4,246 4,254 4,261 4,994 5,006 5,019 5,031 4,444 4,451 4,459 4,466 36,000 36,050 36,100 36,150 36,050 36,100 36,150 36,200 5,744 5,756 5,769 5,781 4,689 4,696 4,704 4,711 5,744 5,756 5,769 5,781 4,894 4,901 4,909 4,916 39,000 39,050 39,100 39,150 39,050 39,100 39,150 39,200 6,494 6,506 6,519 6,531 5,139 5,146 5,154 5,161 6,494 6,506 6,519 6,531 5,356 5,369 5,381 5,394 33,200 33,250 33,300 33,350 33,250 33,300 33,350 33,400 5,044 5,056 5,069 5,081 4,269 4,276 4,284 4,291 5,044 5,056 5,069 5,081 4,474 4,481 4,489 4,496 36,200 36,250 36,300 36,350 36,250 36,300 36,350 36,400 5,794 5,806 5,819 5,831 4,719 4,726 4,734 4,741 5,794 5,806 5,819 5,831 4,924 4,931 4,939 4,946 39,200 39,250 39,300 39,350 39,250 39,300 39,350 39,400 6,544 6,556 6,569 6,581 5,169 5,176 5,184 5,191 6,544 6,556 6,569 6,581 5,406 5,419 5,431 5,444 33,400 33,450 33,500 33,550 33,450 33,500 33,550 33,600 5,094 5,106 5,119 5,131 4,299 4,306 4,314 4,321 5,094 5,106 5,119 5,131 4,504 4,511 4,519 4,526 36,400 36,450 36,500 36,550 36,450 36,500 36,550 36,600 5,844 5,856 5,869 5,881 4,749 4,756 4,764 4,771 5,844 5,856 5,869 5,881 4,954 4,961 4,969 4,976 39,400 39,450 39,500 39,550 39,450 39,500 39,550 39,600 6,594 6,606 6,619 6,631 5,199 5,206 5,214 5,221 6,594 6,606 6,619 6,631 5,456 5,469 5,481 5,494 33,600 33,650 33,700 33,750 33,650 33,700 33,750 33,800 5,144 5,156 5,169 5,181 4,329 4,336 4,344 4,351 5,144 5,156 5,169 5,181 4,534 4,541 4,549 4,556 36,600 36,650 36,700 36,750 36,650 36,700 36,750 36,800 5,894 5,906 5,919 5,931 4,779 4,786 4,794 4,801 5,894 5,906 5,919 5,931 4,984 4,991 4,999 5,006 39,600 39,650 39,700 39,750 39,650 39,700 39,750 39,800 6,644 6,656 6,669 6,681 5,229 5,236 5,244 5,251 6,644 6,656 6,669 6,681 5,506 5,519 5,531 5,544 33,800 33,850 33,900 33,950 33,850 33,900 33,950 34,000 5,194 5,206 5,219 5,231 4,359 4,366 4,374 4,381 5,194 5,206 5,219 5,231 4,564 4,571 4,579 4,586 36,800 36,850 36,900 36,950 36,850 36,900 36,950 37,000 5,944 5,956 5,969 5,981 4,809 4,816 4,824 4,831 5,944 5,956 5,969 5,981 5,014 5,021 5,029 5,036 39,800 39,850 39,900 39,950 39,850 39,900 39,950 40,000 6,694 6,706 6,719 6,731 5,259 5,266 5,274 5,281 6,694 6,706 6,719 6,731 5,556 5,569 5,581 5,594 37,000 34,000 40,000 34,000 34,050 34,100 34,150 34,050 34,100 34,150 34,200 5,244 5,256 5,269 5,281 4,389 4,396 4,404 4,411 5,244 5,256 5,269 5,281 4,594 4,601 4,609 4,616 37,000 37,050 37,100 37,150 37,050 37,100 37,150 37,200 5,994 6,006 6,019 6,031 4,839 4,846 4,854 4,861 5,994 6,006 6,019 6,031 5,044 5,051 5,059 5,066 40,000 40,050 40,100 40,150 40,050 40,100 40,150 40,200 6,744 6,756 6,769 6,781 5,289 5,296 5,304 5,311 6,744 6,756 6,769 6,781 5,606 5,619 5,631 5,644 34,200 34,250 34,300 34,350 34,250 34,300 34,350 34,400 5,294 5,306 5,319 5,331 4,419 4,426 4,434 4,441 5,294 5,306 5,319 5,331 4,624 4,631 4,639 4,646 37,200 37,250 37,300 37,350 37,250 37,300 37,350 37,400 6,044 6,056 6,069 6,081 4,869 4,876 4,884 4,891 6,044 6,056 6,069 6,081 5,074 5,081 5,089 5,096 40,200 40,250 40,300 40,350 40,250 40,300 40,350 40,400 6,794 6,806 6,819 6,831 5,319 5,326 5,334 5,341 6,794 6,806 6,819 6,831 5,656 5,669 5,681 5,694 34,400 34,450 34,500 34,550 34,450 34,500 34,550 34,600 5,344 5,356 5,369 5,381 4,449 4,456 4,464 4,471 5,344 5,356 5,369 5,381 4,654 4,661 4,669 4,676 37,400 37,450 37,500 37,550 37,450 37,500 37,550 37,600 6,094 6,106 6,119 6,131 4,899 4,906 4,914 4,921 6,094 6,106 6,119 6,131 5,104 5,111 5,119 5,126 40,400 40,450 40,500 40,550 40,450 40,500 40,550 40,600 6,844 6,856 6,869 6,881 5,349 5,356 5,364 5,371 6,844 6,856 6,869 6,881 5,706 5,719 5,731 5,744 34,600 34,650 34,700 34,750 34,650 34,700 34,750 34,800 5,394 5,406 5,419 5,431 4,479 4,486 4,494 4,501 5,394 5,406 5,419 5,431 4,684 4,691 4,699 4,706 37,600 37,650 37,700 37,750 37,650 37,700 37,750 37,800 6,144 6,156 6,169 6,181 4,929 4,936 4,944 4,951 6,144 6,156 6,169 6,181 5,134 5,141 5,149 5,156 40,600 40,650 40,700 40,750 40,650 40,700 40,750 40,800 6,894 6,906 6,919 6,931 5,379 5,386 5,394 5,401 6,894 6,906 6,919 6,931 5,756 5,769 5,781 5,794 37,800 37,850 37,850 37,900 37,900 37,950 37,950 38,000 widow(er). 6,194 6,206 6,219 6,231 4,959 4,966 4,974 4,981 6,194 6,206 6,219 6,231 5,164 5,171 5,179 5,186 40,800 40,850 40,900 40,950 40,850 40,900 40,950 41,000 6,944 6,956 6,969 6,981 5,409 5,416 5,424 5,431 6,944 6,956 6,969 6,981 5,806 5,819 5,831 5,844 34,800 34,850 5,444 34,850 34,900 5,456 34,900 34,950 5,469 34,950 35,000 5,481 * This column must also 4,509 4,516 4,524 4,531 be used 5,444 4,714 5,456 4,721 5,469 4,729 5,481 4,736 by a qualifying (Continued on page 65) - 64 - Page 65 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 41,000 Married filing jointly * Married filing separately Head of a household Your tax is— 44,000 47,000 41,000 41,050 41,100 41,150 41,050 41,100 41,150 41,200 6,994 7,006 7,019 7,031 5,439 5,446 5,454 5,461 6,994 7,006 7,019 7,031 5,856 5,869 5,881 5,894 44,000 44,050 44,100 44,150 44,050 44,100 44,150 44,200 7,744 7,756 7,769 7,781 5,889 5,896 5,904 5,911 7,744 7,756 7,769 7,781 6,606 6,619 6,631 6,644 47,000 47,050 47,100 47,150 47,050 47,100 47,150 47,200 8,494 8,506 8,519 8,531 6,339 6,346 6,354 6,361 8,494 8,506 8,519 8,531 7,356 7,369 7,381 7,394 41,200 41,250 41,300 41,350 41,250 41,300 41,350 41,400 7,044 7,056 7,069 7,081 5,469 5,476 5,484 5,491 7,044 7,056 7,069 7,081 5,906 5,919 5,931 5,944 44,200 44,250 44,300 44,350 44,250 44,300 44,350 44,400 7,794 7,806 7,819 7,831 5,919 5,926 5,934 5,941 7,794 7,806 7,819 7,831 6,656 6,669 6,681 6,694 47,200 47,250 47,300 47,350 47,250 47,300 47,350 47,400 8,544 8,556 8,569 8,581 6,369 6,376 6,384 6,391 8,544 8,556 8,569 8,581 7,406 7,419 7,431 7,444 41,400 41,450 41,500 41,550 41,450 41,500 41,550 41,600 7,094 7,106 7,119 7,131 5,499 5,506 5,514 5,521 7,094 7,106 7,119 7,131 5,956 5,969 5,981 5,994 44,400 44,450 44,500 44,550 44,450 44,500 44,550 44,600 7,844 7,856 7,869 7,881 5,949 5,956 5,964 5,971 7,844 7,856 7,869 7,881 6,706 6,719 6,731 6,744 47,400 47,450 47,500 47,550 47,450 47,500 47,550 47,600 8,594 8,606 8,619 8,631 6,399 6,406 6,414 6,421 8,594 8,606 8,619 8,631 7,456 7,469 7,481 7,494 41,600 41,650 41,700 41,750 41,650 41,700 41,750 41,800 7,144 7,156 7,169 7,181 5,529 5,536 5,544 5,551 7,144 7,156 7,169 7,181 6,006 6,019 6,031 6,044 44,600 44,650 44,700 44,750 44,650 44,700 44,750 44,800 7,894 7,906 7,919 7,931 5,979 5,986 5,994 6,001 7,894 7,906 7,919 7,931 6,756 6,769 6,781 6,794 47,600 47,650 47,700 47,750 47,650 47,700 47,750 47,800 8,644 8,656 8,669 8,681 6,429 6,436 6,444 6,451 8,644 8,656 8,669 8,681 7,506 7,519 7,531 7,544 41,800 41,850 41,900 41,950 41,850 41,900 41,950 42,000 7,194 7,206 7,219 7,231 5,559 5,566 5,574 5,581 7,194 7,206 7,219 7,231 6,056 6,069 6,081 6,094 44,800 44,850 44,900 44,950 44,850 44,900 44,950 45,000 7,944 7,956 7,969 7,981 6,009 6,016 6,024 6,031 7,944 7,956 7,969 7,981 6,806 6,819 6,831 6,844 47,800 47,850 47,900 47,950 47,850 47,900 47,950 48,000 8,694 8,706 8,719 8,731 6,459 6,466 6,474 6,481 8,694 8,706 8,719 8,731 7,556 7,569 7,581 7,594 42,000 45,000 48,000 42,000 42,050 42,100 42,150 42,050 42,100 42,150 42,200 7,244 7,256 7,269 7,281 5,589 5,596 5,604 5,611 7,244 7,256 7,269 7,281 6,106 6,119 6,131 6,144 45,000 45,050 45,100 45,150 45,050 45,100 45,150 45,200 7,994 8,006 8,019 8,031 6,039 6,046 6,054 6,061 7,994 8,006 8,019 8,031 6,856 6,869 6,881 6,894 48,000 48,050 48,100 48,150 48,050 48,100 48,150 48,200 8,744 8,756 8,769 8,781 6,489 6,496 6,504 6,511 8,744 8,756 8,769 8,781 7,606 7,619 7,631 7,644 42,200 42,250 42,300 42,350 42,250 42,300 42,350 42,400 7,294 7,306 7,319 7,331 5,619 5,626 5,634 5,641 7,294 7,306 7,319 7,331 6,156 6,169 6,181 6,194 45,200 45,250 45,300 45,350 45,250 45,300 45,350 45,400 8,044 8,056 8,069 8,081 6,069 6,076 6,084 6,091 8,044 8,056 8,069 8,081 6,906 6,919 6,931 6,944 48,200 48,250 48,300 48,350 48,250 48,300 48,350 48,400 8,794 8,806 8,819 8,831 6,519 6,526 6,534 6,541 8,794 8,806 8,819 8,831 7,656 7,669 7,681 7,694 42,400 42,450 42,500 42,550 42,450 42,500 42,550 42,600 7,344 7,356 7,369 7,381 5,649 5,656 5,664 5,671 7,344 7,356 7,369 7,381 6,206 6,219 6,231 6,244 45,400 45,450 45,500 45,550 45,450 45,500 45,550 45,600 8,094 8,106 8,119 8,131 6,099 6,106 6,114 6,121 8,094 8,106 8,119 8,131 6,956 6,969 6,981 6,994 48,400 48,450 48,500 48,550 48,450 48,500 48,550 48,600 8,844 8,856 8,869 8,881 6,549 6,556 6,564 6,571 8,844 8,856 8,869 8,881 7,706 7,719 7,731 7,744 42,600 42,650 42,700 42,750 42,650 42,700 42,750 42,800 7,394 7,406 7,419 7,431 5,679 5,686 5,694 5,701 7,394 7,406 7,419 7,431 6,256 6,269 6,281 6,294 45,600 45,650 45,700 45,750 45,650 45,700 45,750 45,800 8,144 8,156 8,169 8,181 6,129 6,136 6,144 6,151 8,144 8,156 8,169 8,181 7,006 7,019 7,031 7,044 48,600 48,650 48,700 48,750 48,650 48,700 48,750 48,800 8,894 8,906 8,919 8,931 6,579 6,586 6,594 6,601 8,894 8,906 8,919 8,931 7,756 7,769 7,781 7,794 42,800 42,850 42,900 42,950 42,850 42,900 42,950 43,000 7,444 7,456 7,469 7,481 5,709 5,716 5,724 5,731 7,444 7,456 7,469 7,481 6,306 6,319 6,331 6,344 45,800 45,850 45,900 45,950 45,850 45,900 45,950 46,000 8,194 8,206 8,219 8,231 6,159 6,166 6,174 6,181 8,194 8,206 8,219 8,231 7,056 7,069 7,081 7,094 48,800 48,850 48,900 48,950 48,850 48,900 48,950 49,000 8,944 8,956 8,969 8,981 6,609 6,616 6,624 6,631 8,944 8,956 8,969 8,981 7,806 7,819 7,831 7,844 43,000 46,000 49,000 43,000 43,050 43,100 43,150 43,050 43,100 43,150 43,200 7,494 7,506 7,519 7,531 5,739 5,746 5,754 5,761 7,494 7,506 7,519 7,531 6,356 6,369 6,381 6,394 46,000 46,050 46,100 46,150 46,050 46,100 46,150 46,200 8,244 8,256 8,269 8,281 6,189 6,196 6,204 6,211 8,244 8,256 8,269 8,281 7,106 7,119 7,131 7,144 49,000 49,050 49,100 49,150 49,050 49,100 49,150 49,200 8,994 9,006 9,019 9,031 6,639 6,646 6,654 6,661 8,994 9,006 9,019 9,031 7,856 7,869 7,881 7,894 43,200 43,250 43,300 43,350 43,250 43,300 43,350 43,400 7,544 7,556 7,569 7,581 5,769 5,776 5,784 5,791 7,544 7,556 7,569 7,581 6,406 6,419 6,431 6,444 46,200 46,250 46,300 46,350 46,250 46,300 46,350 46,400 8,294 8,306 8,319 8,331 6,219 6,226 6,234 6,241 8,294 8,306 8,319 8,331 7,156 7,169 7,181 7,194 49,200 49,250 49,300 49,350 49,250 49,300 49,350 49,400 9,044 9,056 9,069 9,081 6,669 6,676 6,684 6,691 9,044 9,056 9,069 9,081 7,906 7,919 7,931 7,944 43,400 43,450 43,500 43,550 43,450 43,500 43,550 43,600 7,594 7,606 7,619 7,631 5,799 5,806 5,814 5,821 7,594 7,606 7,619 7,631 6,456 6,469 6,481 6,494 46,400 46,450 46,500 46,550 46,450 46,500 46,550 46,600 8,344 8,356 8,369 8,381 6,249 6,256 6,264 6,271 8,344 8,356 8,369 8,381 7,206 7,219 7,231 7,244 49,400 49,450 49,500 49,550 49,450 49,500 49,550 49,600 9,094 9,106 9,119 9,131 6,699 6,706 6,714 6,721 9,094 9,106 9,119 9,131 7,956 7,969 7,981 7,994 43,600 43,650 43,700 43,750 43,650 43,700 43,750 43,800 7,644 7,656 7,669 7,681 5,829 5,836 5,844 5,851 7,644 7,656 7,669 7,681 6,506 6,519 6,531 6,544 46,600 46,650 46,700 46,750 46,650 46,700 46,750 46,800 8,394 8,406 8,419 8,431 6,279 6,286 6,294 6,301 8,394 8,406 8,419 8,431 7,256 7,269 7,281 7,294 49,600 49,650 49,700 49,750 49,650 49,700 49,750 49,800 9,144 9,156 9,169 9,181 6,729 6,736 6,744 6,751 9,144 9,156 9,169 9,181 8,006 8,019 8,031 8,044 46,800 46,850 46,850 46,900 46,900 46,950 46,950 47,000 widow(er). 8,444 8,456 8,469 8,481 6,309 6,316 6,324 6,331 8,444 8,456 8,469 8,481 7,306 7,319 7,331 7,344 49,800 49,850 49,900 49,950 49,850 49,900 49,950 50,000 9,194 9,206 9,219 9,231 6,759 6,766 6,774 6,781 9,194 9,206 9,219 9,231 8,056 8,069 8,081 8,094 43,800 43,850 7,694 43,850 43,900 7,706 43,900 43,950 7,719 43,950 44,000 7,731 * This column must also 5,859 5,866 5,874 5,881 be used 7,694 6,556 7,706 6,569 7,719 6,581 7,731 6,594 by a qualifying (Continued on page 66) - 65 - Page 66 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 50,000 Married filing jointly * Married filing separately Head of a household Your tax is— 53,000 56,000 50,000 50,050 50,100 50,150 50,050 50,100 50,150 50,200 9,244 9,256 9,269 9,281 6,789 6,796 6,804 6,811 9,244 9,256 9,269 9,281 8,106 8,119 8,131 8,144 53,000 53,050 53,100 53,150 53,050 9,994 53,100 10,006 53,150 10,019 53,200 10,031 7,239 9,994 7,246 10,006 7,254 10,019 7,261 10,031 8,856 8,869 8,881 8,894 56,000 56,050 56,100 56,150 56,050 56,100 56,150 56,200 10,744 10,756 10,769 10,781 7,689 7,696 7,704 7,711 10,744 10,756 10,769 10,781 9,606 9,619 9,631 9,644 50,200 50,250 50,300 50,350 50,250 50,300 50,350 50,400 9,294 9,306 9,319 9,331 6,819 6,826 6,834 6,841 9,294 9,306 9,319 9,331 8,156 8,169 8,181 8,194 53,200 53,250 53,300 53,350 53,250 53,300 53,350 53,400 10,044 10,056 10,069 10,081 7,269 7,276 7,284 7,291 10,044 10,056 10,069 10,081 8,906 8,919 8,931 8,944 56,200 56,250 56,300 56,350 56,250 56,300 56,350 56,400 10,794 10,806 10,819 10,831 7,719 7,726 7,734 7,741 10,794 10,806 10,819 10,831 9,656 9,669 9,681 9,694 50,400 50,450 50,500 50,550 50,450 50,500 50,550 50,600 9,344 9,356 9,369 9,381 6,849 6,856 6,864 6,871 9,344 9,356 9,369 9,381 8,206 8,219 8,231 8,244 53,400 53,450 53,500 53,550 53,450 53,500 53,550 53,600 10,094 10,106 10,119 10,131 7,299 7,306 7,314 7,321 10,094 10,106 10,119 10,131 8,956 8,969 8,981 8,994 56,400 56,450 56,500 56,550 56,450 56,500 56,550 56,600 10,844 10,856 10,869 10,881 7,749 7,756 7,764 7,771 10,844 10,856 10,869 10,881 9,706 9,719 9,731 9,744 50,600 50,650 50,700 50,750 50,650 50,700 50,750 50,800 9,394 9,406 9,419 9,431 6,879 6,886 6,894 6,901 9,394 9,406 9,419 9,431 8,256 8,269 8,281 8,294 53,600 53,650 53,700 53,750 53,650 53,700 53,750 53,800 10,144 10,156 10,169 10,181 7,329 7,336 7,344 7,351 10,144 10,156 10,169 10,181 9,006 9,019 9,031 9,044 56,600 56,650 56,700 56,750 56,650 56,700 56,750 56,800 10,894 10,906 10,919 10,931 7,779 7,786 7,794 7,801 10,894 10,906 10,919 10,931 9,756 9,769 9,781 9,794 50,800 50,850 50,900 50,950 50,850 50,900 50,950 51,000 9,444 9,456 9,469 9,481 6,909 6,916 6,924 6,931 9,444 9,456 9,469 9,481 8,306 8,319 8,331 8,344 53,800 53,850 53,900 53,950 53,850 53,900 53,950 54,000 10,194 10,206 10,219 10,231 7,359 7,366 7,374 7,381 10,194 10,206 10,219 10,231 9,056 9,069 9,081 9,094 56,800 56,850 56,900 56,950 56,850 56,900 56,950 57,000 10,944 10,956 10,969 10,981 7,809 7,816 7,824 7,831 10,944 10,956 10,969 10,981 9,806 9,819 9,831 9,844 51,000 54,000 57,000 51,000 51,050 51,100 51,150 51,050 51,100 51,150 51,200 9,494 9,506 9,519 9,531 6,939 6,946 6,954 6,961 9,494 9,506 9,519 9,531 8,356 8,369 8,381 8,394 54,000 54,050 54,100 54,150 54,050 54,100 54,150 54,200 10,244 10,256 10,269 10,281 7,389 7,396 7,404 7,411 10,244 10,256 10,269 10,281 9,106 9,119 9,131 9,144 57,000 57,050 57,100 57,150 57,050 57,100 57,150 57,200 10,994 11,006 11,019 11,031 7,839 7,846 7,854 7,861 10,994 11,006 11,019 11,031 9,856 9,869 9,881 9,894 51,200 51,250 51,300 51,350 51,250 51,300 51,350 51,400 9,544 9,556 9,569 9,581 6,969 6,976 6,984 6,991 9,544 9,556 9,569 9,581 8,406 8,419 8,431 8,444 54,200 54,250 54,300 54,350 54,250 54,300 54,350 54,400 10,294 10,306 10,319 10,331 7,419 7,426 7,434 7,441 10,294 10,306 10,319 10,331 9,156 9,169 9,181 9,194 57,200 57,250 57,300 57,350 57,250 57,300 57,350 57,400 11,044 11,056 11,069 11,081 7,869 7,876 7,884 7,891 11,044 11,056 11,069 11,081 9,906 9,919 9,931 9,944 51,400 51,450 51,500 51,550 51,450 51,500 51,550 51,600 9,594 9,606 9,619 9,631 6,999 7,006 7,014 7,021 9,594 9,606 9,619 9,631 8,456 8,469 8,481 8,494 54,400 54,450 54,500 54,550 54,450 54,500 54,550 54,600 10,344 10,356 10,369 10,381 7,449 7,456 7,464 7,471 10,344 10,356 10,369 10,381 9,206 9,219 9,231 9,244 57,400 57,450 57,500 57,550 57,450 57,500 57,550 57,600 11,094 11,106 11,119 11,131 7,899 7,906 7,914 7,921 11,094 11,106 11,119 11,131 9,956 9,969 9,981 9,994 51,600 51,650 51,700 51,750 51,650 51,700 51,750 51,800 9,644 9,656 9,669 9,681 7,029 7,036 7,044 7,051 9,644 9,656 9,669 9,681 8,506 8,519 8,531 8,544 54,600 54,650 54,700 54,750 54,650 54,700 54,750 54,800 10,394 10,406 10,419 10,431 7,479 7,486 7,494 7,501 10,394 10,406 10,419 10,431 9,256 9,269 9,281 9,294 57,600 57,650 57,700 57,750 57,650 57,700 57,750 57,800 11,144 11,156 11,169 11,181 7,929 7,936 7,944 7,951 11,144 11,156 11,169 11,181 10,006 10,019 10,031 10,044 51,800 51,850 51,900 51,950 51,850 51,900 51,950 52,000 9,694 9,706 9,719 9,731 7,059 7,066 7,074 7,081 9,694 9,706 9,719 9,731 8,556 8,569 8,581 8,594 54,800 54,850 54,900 54,950 54,850 54,900 54,950 55,000 10,444 10,456 10,469 10,481 7,509 7,516 7,524 7,531 10,444 10,456 10,469 10,481 9,306 9,319 9,331 9,344 57,800 57,850 57,900 57,950 57,850 57,900 57,950 58,000 11,194 11,206 11,219 11,231 7,959 7,966 7,974 7,981 11,194 11,206 11,219 11,231 10,056 10,069 10,081 10,094 52,000 55,000 58,000 52,000 52,050 52,100 52,150 52,050 52,100 52,150 52,200 9,744 9,756 9,769 9,781 7,089 7,096 7,104 7,111 9,744 9,756 9,769 9,781 8,606 8,619 8,631 8,644 55,000 55,050 55,100 55,150 55,050 55,100 55,150 55,200 10,494 10,506 10,519 10,531 7,539 7,546 7,554 7,561 10,494 10,506 10,519 10,531 9,356 9,369 9,381 9,394 58,000 58,050 58,100 58,150 58,050 58,100 58,150 58,200 11,244 11,256 11,269 11,281 7,989 7,996 8,006 8,019 11,244 11,256 11,269 11,281 10,106 10,119 10,131 10,144 52,200 52,250 52,300 52,350 52,250 52,300 52,350 52,400 9,794 9,806 9,819 9,831 7,119 7,126 7,134 7,141 9,794 9,806 9,819 9,831 8,656 8,669 8,681 8,694 55,200 55,250 55,300 55,350 55,250 55,300 55,350 55,400 10,544 10,556 10,569 10,581 7,569 7,576 7,584 7,591 10,544 10,556 10,569 10,581 9,406 9,419 9,431 9,444 58,200 58,250 58,300 58,350 58,250 58,300 58,350 58,400 11,294 11,306 11,319 11,331 8,031 8,044 8,056 8,069 11,294 11,306 11,319 11,331 10,156 10,169 10,181 10,194 52,400 52,450 52,500 52,550 52,450 52,500 52,550 52,600 9,844 9,856 9,869 9,881 7,149 7,156 7,164 7,171 9,844 9,856 9,869 9,881 8,706 8,719 8,731 8,744 55,400 55,450 55,500 55,550 55,450 55,500 55,550 55,600 10,594 10,606 10,619 10,631 7,599 7,606 7,614 7,621 10,594 10,606 10,619 10,631 9,456 9,469 9,481 9,494 58,400 58,450 58,500 58,550 58,450 58,500 58,550 58,600 11,344 11,356 11,369 11,381 8,081 8,094 8,106 8,119 11,344 11,356 11,369 11,381 10,206 10,219 10,231 10,244 52,600 52,650 52,700 52,750 52,650 52,700 52,750 52,800 9,894 9,906 9,919 9,931 7,179 7,186 7,194 7,201 9,894 9,906 9,919 9,931 8,756 8,769 8,781 8,794 55,600 55,650 55,700 55,750 55,650 55,700 55,750 55,800 10,644 10,656 10,669 10,681 7,629 7,636 7,644 7,651 10,644 10,656 10,669 10,681 9,506 9,519 9,531 9,544 58,600 58,650 58,700 58,750 58,650 58,700 58,750 58,800 11,394 11,406 11,419 11,431 8,131 8,144 8,156 8,169 11,394 11,408 11,422 11,436 10,256 10,269 10,281 10,294 55,800 55,850 55,850 55,900 55,900 55,950 55,950 56,000 widow(er). 10,694 10,706 10,719 10,731 7,659 7,666 7,674 7,681 10,694 10,706 10,719 10,731 9,556 9,569 9,581 9,594 58,800 58,850 58,900 58,950 58,850 58,900 58,950 59,000 11,444 11,456 11,469 11,481 8,181 8,194 8,206 8,219 11,450 11,464 11,478 11,492 10,306 10,319 10,331 10,344 52,800 52,850 9,944 52,850 52,900 9,956 52,900 52,950 9,969 52,950 53,000 9,981 * This column must also 7,209 7,216 7,224 7,231 be used 9,944 8,806 9,956 8,819 9,969 8,831 9,981 8,844 by a qualifying (Continued on page 67) - 66 - Page 67 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— Married filing separately Head of a household Your tax is— 62,000 59,000 Married filing jointly * 65,000 59,000 59,050 59,100 59,150 59,050 59,100 59,150 59,200 11,494 11,506 11,519 11,531 8,231 8,244 8,256 8,269 11,506 11,520 11,534 11,548 10,356 10,369 10,381 10,394 62,000 62,050 62,100 62,150 62,050 62,100 62,150 62,200 12,244 12,256 12,269 12,281 8,981 8,994 9,006 9,019 12,346 12,360 12,374 12,388 11,106 11,119 11,131 11,144 65,000 65,050 65,100 65,150 65,050 65,100 65,150 65,200 12,994 13,006 13,019 13,031 9,731 9,744 9,756 9,769 13,186 13,200 13,214 13,228 11,856 11,869 11,881 11,894 59,200 59,250 59,300 59,350 59,250 59,300 59,350 59,400 11,544 11,556 11,569 11,581 8,281 8,294 8,306 8,319 11,562 11,576 11,590 11,604 10,406 10,419 10,431 10,444 62,200 62,250 62,300 62,350 62,250 62,300 62,350 62,400 12,294 12,306 12,319 12,331 9,031 9,044 9,056 9,069 12,402 12,416 12,430 12,444 11,156 11,169 11,181 11,194 65,200 65,250 65,300 65,350 65,250 65,300 65,350 65,400 13,044 13,056 13,069 13,081 9,781 9,794 9,806 9,819 13,242 13,256 13,270 13,284 11,906 11,919 11,931 11,944 59,400 59,450 59,500 59,550 59,450 59,500 59,550 59,600 11,594 11,606 11,619 11,631 8,331 8,344 8,356 8,369 11,618 11,632 11,646 11,660 10,456 10,469 10,481 10,494 62,400 62,450 62,500 62,550 62,450 62,500 62,550 62,600 12,344 12,356 12,369 12,381 9,081 9,094 9,106 9,119 12,458 12,472 12,486 12,500 11,206 11,219 11,231 11,244 65,400 65,450 65,500 65,550 65,450 65,500 65,550 65,600 13,094 13,106 13,119 13,131 9,831 9,844 9,856 9,869 13,298 13,312 13,326 13,340 11,956 11,969 11,981 11,994 59,600 59,650 59,700 59,750 59,650 59,700 59,750 59,800 11,644 11,656 11,669 11,681 8,381 8,394 8,406 8,419 11,674 11,688 11,702 11,716 10,506 10,519 10,531 10,544 62,600 62,650 62,700 62,750 62,650 62,700 62,750 62,800 12,394 12,406 12,419 12,431 9,131 9,144 9,156 9,169 12,514 12,528 12,542 12,556 11,256 11,269 11,281 11,294 65,600 65,650 65,700 65,750 65,650 65,700 65,750 65,800 13,144 13,156 13,169 13,181 9,881 9,894 9,906 9,919 13,354 13,368 13,382 13,396 12,006 12,019 12,031 12,044 59,800 59,850 59,900 59,950 59,850 59,900 59,950 60,000 11,694 11,706 11,719 11,731 8,431 8,444 8,456 8,469 11,730 11,744 11,758 11,772 10,556 10,569 10,581 10,594 62,800 62,850 62,900 62,950 62,850 62,900 62,950 63,000 12,444 12,456 12,469 12,481 9,181 9,194 9,206 9,219 12,570 12,584 12,598 12,612 11,306 11,319 11,331 11,344 65,800 65,850 65,900 65,950 65,850 65,900 65,950 66,000 13,194 13,206 13,219 13,231 9,931 9,944 9,956 9,969 13,410 13,424 13,438 13,452 12,056 12,069 12,081 12,094 60,000 66,000 63,000 60,000 60,050 60,100 60,150 60,050 60,100 60,150 60,200 11,744 11,756 11,769 11,781 8,481 8,494 8,506 8,519 11,786 11,800 11,814 11,828 10,606 10,619 10,631 10,644 63,000 63,050 63,100 63,150 63,050 63,100 63,150 63,200 12,494 12,506 12,519 12,531 9,231 9,244 9,256 9,269 12,626 12,640 12,654 12,668 11,356 11,369 11,381 11,394 66,000 66,050 66,100 66,150 66,050 66,100 66,150 66,200 13,244 9,981 13,466 13,256 9,994 13,480 13,269 10,006 13,494 13,281 10,019 13,508 12,106 12,119 12,131 12,144 60,200 60,250 60,300 60,350 60,250 60,300 60,350 60,400 11,794 11,806 11,819 11,831 8,531 8,544 8,556 8,569 11,842 11,856 11,870 11,884 10,656 10,669 10,681 10,694 63,200 63,250 63,300 63,350 63,250 63,300 63,350 63,400 12,544 12,556 12,569 12,581 9,281 9,294 9,306 9,319 12,682 12,696 12,710 12,724 11,406 11,419 11,431 11,444 66,200 66,250 66,300 66,350 66,250 66,300 66,350 66,400 13,294 13,306 13,319 13,331 10,031 10,044 10,056 10,069 13,522 13,536 13,550 13,564 12,156 12,169 12,181 12,194 60,400 60,450 60,500 60,550 60,450 60,500 60,550 60,600 11,844 11,856 11,869 11,881 8,581 8,594 8,606 8,619 11,898 11,912 11,926 11,940 10,706 10,719 10,731 10,744 63,400 63,450 63,500 63,550 63,450 63,500 63,550 63,600 12,594 12,606 12,619 12,631 9,331 9,344 9,356 9,369 12,738 12,752 12,766 12,780 11,456 11,469 11,481 11,494 66,400 66,450 66,500 66,550 66,450 66,500 66,550 66,600 13,344 13,356 13,369 13,381 10,081 10,094 10,106 10,119 13,578 13,592 13,606 13,620 12,206 12,219 12,231 12,244 60,600 60,650 60,700 60,750 60,650 60,700 60,750 60,800 11,894 11,906 11,919 11,931 8,631 8,644 8,656 8,669 11,954 11,968 11,982 11,996 10,756 10,769 10,781 10,794 63,600 63,650 63,700 63,750 63,650 63,700 63,750 63,800 12,644 12,656 12,669 12,681 9,381 9,394 9,406 9,419 12,794 12,808 12,822 12,836 11,506 11,519 11,531 11,544 66,600 66,650 66,700 66,750 66,650 66,700 66,750 66,800 13,394 13,406 13,419 13,431 10,131 10,144 10,156 10,169 13,634 13,648 13,662 13,676 12,256 12,269 12,281 12,294 60,800 60,850 60,900 60,950 60,850 60,900 60,950 61,000 11,944 11,956 11,969 11,981 8,681 8,694 8,706 8,719 12,010 12,024 12,038 12,052 10,806 10,819 10,831 10,844 63,800 63,850 63,900 63,950 63,850 63,900 63,950 64,000 12,694 12,706 12,719 12,731 9,431 9,444 9,456 9,469 12,850 12,864 12,878 12,892 11,556 11,569 11,581 11,594 66,800 66,850 66,900 66,950 66,850 66,900 66,950 67,000 13,444 13,456 13,469 13,481 10,181 10,194 10,206 10,219 13,690 13,704 13,718 13,732 12,306 12,319 12,331 12,344 64,000 61,000 67,000 61,000 61,050 61,100 61,150 61,050 61,100 61,150 61,200 11,994 12,006 12,019 12,031 8,731 8,744 8,756 8,769 12,066 12,080 12,094 12,108 10,856 10,869 10,881 10,894 64,000 64,050 64,100 64,150 64,050 64,100 64,150 64,200 12,744 12,756 12,769 12,781 9,481 9,494 9,506 9,519 12,906 12,920 12,934 12,948 11,606 11,619 11,631 11,644 67,000 67,050 67,100 67,150 67,050 67,100 67,150 67,200 13,494 13,506 13,519 13,531 10,231 10,244 10,256 10,269 13,746 13,760 13,774 13,788 12,356 12,369 12,381 12,394 61,200 61,250 61,300 61,350 61,250 61,300 61,350 61,400 12,044 12,056 12,069 12,081 8,781 8,794 8,806 8,819 12,122 12,136 12,150 12,164 10,906 10,919 10,931 10,944 64,200 64,250 64,300 64,350 64,250 64,300 64,350 64,400 12,794 12,806 12,819 12,831 9,531 9,544 9,556 9,569 12,962 12,976 12,990 13,004 11,656 11,669 11,681 11,694 67,200 67,250 67,300 67,350 67,250 67,300 67,350 67,400 13,544 13,556 13,569 13,581 10,281 10,294 10,306 10,319 13,802 13,816 13,830 13,844 12,406 12,419 12,431 12,444 61,400 61,450 61,500 61,550 61,450 61,500 61,550 61,600 12,094 12,106 12,119 12,131 8,831 8,844 8,856 8,869 12,178 12,192 12,206 12,220 10,956 10,969 10,981 10,994 64,400 64,450 64,500 64,550 64,450 64,500 64,550 64,600 12,844 12,856 12,869 12,881 9,581 9,594 9,606 9,619 13,018 13,032 13,046 13,060 11,706 11,719 11,731 11,744 67,400 67,450 67,500 67,550 67,450 67,500 67,550 67,600 13,594 13,606 13,619 13,631 10,331 10,344 10,356 10,369 13,858 13,872 13,886 13,900 12,456 12,469 12,481 12,494 61,600 61,650 61,700 61,750 61,650 61,700 61,750 61,800 12,144 12,156 12,169 12,181 8,881 8,894 8,906 8,919 12,234 12,248 12,262 12,276 11,006 11,019 11,031 11,044 64,600 64,650 64,700 64,750 64,650 64,700 64,750 64,800 12,894 12,906 12,919 12,931 9,631 9,644 9,656 9,669 13,074 13,088 13,102 13,116 11,756 11,769 11,781 11,794 67,600 67,650 67,700 67,750 67,650 67,700 67,750 67,800 13,644 13,656 13,669 13,681 10,381 10,394 10,406 10,419 13,914 13,928 13,942 13,956 12,506 12,519 12,531 12,544 64,800 64,850 64,850 64,900 64,900 64,950 64,950 65,000 widow(er). 12,944 12,956 12,969 12,981 9,681 9,694 9,706 9,719 13,130 13,144 13,158 13,172 11,806 11,819 11,831 11,844 67,800 67,850 67,900 67,950 67,850 67,900 67,950 68,000 13,694 13,706 13,719 13,731 10,431 10,444 10,456 10,469 13,970 13,984 13,998 14,012 12,556 12,569 12,581 12,594 61,800 61,850 12,194 61,850 61,900 12,206 61,900 61,950 12,219 61,950 62,000 12,231 * This column must also 8,931 12,290 11,056 8,944 12,304 11,069 8,956 12,318 11,081 8,969 12,332 11,094 be used by a qualifying (Continued on page 68) - 67 - Page 68 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 68,000 Married filing jointly * Married filing separately Head of a household Your tax is— 71,000 74,000 68,000 68,050 68,100 68,150 68,050 68,100 68,150 68,200 13,744 13,756 13,769 13,781 10,481 10,494 10,506 10,519 14,026 14,040 14,054 14,068 12,606 12,619 12,631 12,644 71,000 71,050 71,100 71,150 71,050 71,100 71,150 71,200 14,514 14,528 14,542 14,556 11,231 11,244 11,256 11,269 14,866 14,880 14,894 14,908 13,356 13,369 13,381 13,394 74,000 74,050 74,100 74,150 74,050 74,100 74,150 74,200 15,354 15,368 15,382 15,396 11,981 11,994 12,006 12,019 15,706 15,720 15,734 15,748 14,106 14,119 14,131 14,144 68,200 68,250 68,300 68,350 68,250 68,300 68,350 68,400 13,794 13,806 13,819 13,831 10,531 10,544 10,556 10,569 14,082 14,096 14,110 14,124 12,656 12,669 12,681 12,694 71,200 71,250 71,300 71,350 71,250 71,300 71,350 71,400 14,570 14,584 14,598 14,612 11,281 11,294 11,306 11,319 14,922 14,936 14,950 14,964 13,406 13,419 13,431 13,444 74,200 74,250 74,300 74,350 74,250 74,300 74,350 74,400 15,410 15,424 15,438 15,452 12,031 12,044 12,056 12,069 15,762 15,776 15,790 15,804 14,156 14,169 14,181 14,194 68,400 68,450 68,500 68,550 68,450 68,500 68,550 68,600 13,844 13,856 13,869 13,881 10,581 10,594 10,606 10,619 14,138 14,152 14,166 14,180 12,706 12,719 12,731 12,744 71,400 71,450 71,500 71,550 71,450 71,500 71,550 71,600 14,626 14,640 14,654 14,668 11,331 11,344 11,356 11,369 14,978 14,992 15,006 15,020 13,456 13,469 13,481 13,494 74,400 74,450 74,500 74,550 74,450 74,500 74,550 74,600 15,466 15,480 15,494 15,508 12,081 12,094 12,106 12,119 15,818 15,832 15,846 15,860 14,206 14,219 14,231 14,244 68,600 68,650 68,700 68,750 68,650 68,700 68,750 68,800 13,894 13,906 13,919 13,931 10,631 10,644 10,656 10,669 14,194 14,208 14,222 14,236 12,756 12,769 12,781 12,794 71,600 71,650 71,700 71,750 71,650 71,700 71,750 71,800 14,682 14,696 14,710 14,724 11,381 11,394 11,406 11,419 15,034 15,048 15,062 15,076 13,506 13,519 13,531 13,544 74,600 74,650 74,700 74,750 74,650 74,700 74,750 74,800 15,522 15,536 15,550 15,564 12,131 12,144 12,156 12,169 15,874 15,888 15,902 15,916 14,256 14,269 14,281 14,294 68,800 68,850 68,900 68,950 68,850 68,900 68,950 69,000 13,944 13,956 13,969 13,981 10,681 10,694 10,706 10,719 14,250 14,264 14,278 14,292 12,806 12,819 12,831 12,844 71,800 71,850 71,900 71,950 71,850 71,900 71,950 72,000 14,738 14,752 14,766 14,780 11,431 11,444 11,456 11,469 15,090 15,104 15,118 15,132 13,556 13,569 13,581 13,594 74,800 74,850 74,900 74,950 74,850 74,900 74,950 75,000 15,578 15,592 15,606 15,620 12,181 12,194 12,206 12,219 15,930 15,944 15,958 15,972 14,306 14,319 14,331 14,344 69,000 72,000 75,000 69,000 69,050 69,100 69,150 69,050 69,100 69,150 69,200 13,994 14,006 14,019 14,031 10,731 10,744 10,756 10,769 14,306 14,320 14,334 14,348 12,856 12,869 12,881 12,894 72,000 72,050 72,100 72,150 72,050 72,100 72,150 72,200 14,794 14,808 14,822 14,836 11,481 11,494 11,506 11,519 15,146 15,160 15,174 15,188 13,606 13,619 13,631 13,644 75,000 75,050 75,100 75,150 75,050 75,100 75,150 75,200 15,634 15,648 15,662 15,676 12,231 12,244 12,256 12,269 15,986 16,000 16,014 16,028 14,356 14,369 14,381 14,394 69,200 69,250 69,300 69,350 69,250 69,300 69,350 69,400 14,044 14,056 14,069 14,081 10,781 10,794 10,806 10,819 14,362 14,376 14,390 14,404 12,906 12,919 12,931 12,944 72,200 72,250 72,300 72,350 72,250 72,300 72,350 72,400 14,850 14,864 14,878 14,892 11,531 11,544 11,556 11,569 15,202 15,216 15,230 15,244 13,656 13,669 13,681 13,694 75,200 75,250 75,300 75,350 75,250 75,300 75,350 75,400 15,690 15,704 15,718 15,732 12,281 12,294 12,306 12,319 16,042 16,056 16,070 16,084 14,406 14,419 14,431 14,444 69,400 69,450 69,500 69,550 69,450 69,500 69,550 69,600 14,094 14,106 14,119 14,131 10,831 10,844 10,856 10,869 14,418 14,432 14,446 14,460 12,956 12,969 12,981 12,994 72,400 72,450 72,500 72,550 72,450 72,500 72,550 72,600 14,906 14,920 14,934 14,948 11,581 11,594 11,606 11,619 15,258 15,272 15,286 15,300 13,706 13,719 13,731 13,744 75,400 75,450 75,500 75,550 75,450 75,500 75,550 75,600 15,746 15,760 15,774 15,788 12,331 12,344 12,356 12,369 16,098 16,112 16,126 16,140 14,456 14,469 14,481 14,494 69,600 69,650 69,700 69,750 69,650 69,700 69,750 69,800 14,144 14,156 14,169 14,181 10,881 10,894 10,906 10,919 14,474 14,488 14,502 14,516 13,006 13,019 13,031 13,044 72,600 72,650 72,700 72,750 72,650 72,700 72,750 72,800 14,962 14,976 14,990 15,004 11,631 11,644 11,656 11,669 15,314 15,328 15,342 15,356 13,756 13,769 13,781 13,794 75,600 75,650 75,700 75,750 75,650 75,700 75,750 75,800 15,802 15,816 15,830 15,844 12,381 12,394 12,406 12,419 16,154 16,168 16,182 16,196 14,506 14,519 14,531 14,544 69,800 69,850 69,900 69,950 69,850 69,900 69,950 70,000 14,194 14,206 14,219 14,231 10,931 10,944 10,956 10,969 14,530 14,544 14,558 14,572 13,056 13,069 13,081 13,094 72,800 72,850 72,900 72,950 72,850 72,900 72,950 73,000 15,018 15,032 15,046 15,060 11,681 11,694 11,706 11,719 15,370 15,384 15,398 15,412 13,806 13,819 13,831 13,844 75,800 75,850 75,900 75,950 75,850 75,900 75,950 76,000 15,858 15,872 15,886 15,900 12,431 12,444 12,456 12,469 16,210 16,224 16,238 16,252 14,556 14,569 14,581 14,594 70,000 73,000 76,000 70,000 70,050 70,100 70,150 70,050 70,100 70,150 70,200 14,244 14,256 14,269 14,281 10,981 10,994 11,006 11,019 14,586 14,600 14,614 14,628 13,106 13,119 13,131 13,144 73,000 73,050 73,100 73,150 73,050 73,100 73,150 73,200 15,074 15,088 15,102 15,116 11,731 11,744 11,756 11,769 15,426 15,440 15,454 15,468 13,856 13,869 13,881 13,894 76,000 76,050 76,100 76,150 76,050 76,100 76,150 76,200 15,914 15,928 15,942 15,956 12,481 12,494 12,506 12,519 16,266 16,280 16,294 16,308 14,606 14,619 14,631 14,644 70,200 70,250 70,300 70,350 70,250 70,300 70,350 70,400 14,294 14,306 14,319 14,332 11,031 11,044 11,056 11,069 14,642 14,656 14,670 14,684 13,156 13,169 13,181 13,194 73,200 73,250 73,300 73,350 73,250 73,300 73,350 73,400 15,130 15,144 15,158 15,172 11,781 11,794 11,806 11,819 15,482 15,496 15,510 15,524 13,906 13,919 13,931 13,944 76,200 76,250 76,300 76,350 76,250 76,300 76,350 76,400 15,970 15,984 15,998 16,012 12,531 12,544 12,556 12,569 16,322 16,336 16,350 16,364 14,656 14,669 14,681 14,694 70,400 70,450 70,500 70,550 70,450 70,500 70,550 70,600 14,346 14,360 14,374 14,388 11,081 11,094 11,106 11,119 14,698 14,712 14,726 14,740 13,206 13,219 13,231 13,244 73,400 73,450 73,500 73,550 73,450 73,500 73,550 73,600 15,186 15,200 15,214 15,228 11,831 11,844 11,856 11,869 15,538 15,552 15,566 15,580 13,956 13,969 13,981 13,994 76,400 76,450 76,500 76,550 76,450 76,500 76,550 76,600 16,026 16,040 16,054 16,068 12,581 12,594 12,606 12,619 16,378 16,392 16,406 16,420 14,706 14,719 14,731 14,744 70,600 70,650 70,700 70,750 70,650 70,700 70,750 70,800 14,402 14,416 14,430 14,444 11,131 11,144 11,156 11,169 14,754 14,768 14,782 14,796 13,256 13,269 13,281 13,294 73,600 73,650 73,700 73,750 73,650 73,700 73,750 73,800 15,242 15,256 15,270 15,284 11,881 11,894 11,906 11,919 15,594 15,608 15,622 15,636 14,006 14,019 14,031 14,044 76,600 76,650 76,700 76,750 76,650 76,700 76,750 76,800 16,082 16,096 16,110 16,124 12,631 12,644 12,656 12,669 16,434 16,448 16,462 16,476 14,756 14,769 14,781 14,794 70,800 70,850 70,900 70,950 70,850 70,900 70,950 71,000 14,458 14,472 14,486 14,500 11,181 11,194 11,206 11,219 14,810 14,824 14,838 14,852 13,306 13,319 13,331 13,344 73,800 73,850 73,900 73,950 73,850 73,900 73,950 74,000 15,298 15,312 15,326 15,340 11,931 11,944 11,956 11,969 15,650 15,664 15,678 15,692 14,056 14,069 14,081 14,094 76,800 76,850 76,900 76,950 76,850 76,900 76,950 77,000 16,138 16,152 16,166 16,180 12,681 12,694 12,706 12,719 16,490 16,504 16,518 16,532 14,806 14,819 14,831 14,844 (Continued on page 69) * This column must also be used by a qualifying widow(er). - 68 - Page 69 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 77,000 Married filing jointly * Married filing separately Head of a household Your tax is— 80,000 83,000 77,000 77,050 77,100 77,150 77,050 77,100 77,150 77,200 16,194 16,208 16,222 16,236 12,731 12,744 12,756 12,769 16,546 16,560 16,574 16,588 14,856 14,869 14,881 14,894 80,000 80,050 80,100 80,150 80,050 80,100 80,150 80,200 17,034 17,048 17,062 17,076 13,481 13,494 13,506 13,519 17,386 17,400 17,414 17,428 15,606 15,619 15,631 15,644 83,000 83,050 83,100 83,150 83,050 83,100 83,150 83,200 17,874 17,888 17,902 17,916 14,231 14,244 14,256 14,269 18,226 18,240 18,254 18,268 16,356 16,369 16,381 16,394 77,200 77,250 77,300 77,350 77,250 77,300 77,350 77,400 16,250 16,264 16,278 16,292 12,781 12,794 12,806 12,819 16,602 16,616 16,630 16,644 14,906 14,919 14,931 14,944 80,200 80,250 80,300 80,350 80,250 80,300 80,350 80,400 17,090 17,104 17,118 17,132 13,531 13,544 13,556 13,569 17,442 17,456 17,470 17,484 15,656 15,669 15,681 15,694 83,200 83,250 83,300 83,350 83,250 83,300 83,350 83,400 17,930 17,944 17,958 17,972 14,281 14,294 14,306 14,319 18,282 18,296 18,310 18,324 16,406 16,419 16,431 16,444 77,400 77,450 77,500 77,550 77,450 77,500 77,550 77,600 16,306 16,320 16,334 16,348 12,831 12,844 12,856 12,869 16,658 16,672 16,686 16,700 14,956 14,969 14,981 14,994 80,400 80,450 80,500 80,550 80,450 80,500 80,550 80,600 17,146 17,160 17,174 17,188 13,581 13,594 13,606 13,619 17,498 17,512 17,526 17,540 15,706 15,719 15,731 15,744 83,400 83,450 83,500 83,550 83,450 83,500 83,550 83,600 17,986 18,000 18,014 18,028 14,331 14,344 14,356 14,369 18,338 18,352 18,366 18,380 16,456 16,469 16,481 16,494 77,600 77,650 77,700 77,750 77,650 77,700 77,750 77,800 16,362 16,376 16,390 16,404 12,881 12,894 12,906 12,919 16,714 16,728 16,742 16,756 15,006 15,019 15,031 15,044 80,600 80,650 80,700 80,750 80,650 80,700 80,750 80,800 17,202 17,216 17,230 17,244 13,631 13,644 13,656 13,669 17,554 17,568 17,582 17,596 15,756 15,769 15,781 15,794 83,600 83,650 83,700 83,750 83,650 83,700 83,750 83,800 18,042 18,056 18,070 18,084 14,381 14,394 14,406 14,419 18,394 18,408 18,422 18,436 16,506 16,519 16,531 16,544 77,800 77,850 77,900 77,950 77,850 77,900 77,950 78,000 16,418 16,432 16,446 16,460 12,931 12,944 12,956 12,969 16,770 16,784 16,798 16,812 15,056 15,069 15,081 15,094 80,800 80,850 80,900 80,950 80,850 80,900 80,950 81,000 17,258 17,272 17,286 17,300 13,681 13,694 13,706 13,719 17,610 17,624 17,638 17,652 15,806 15,819 15,831 15,844 83,800 83,850 83,900 83,950 83,850 83,900 83,950 84,000 18,098 18,112 18,126 18,140 14,431 14,444 14,456 14,469 18,450 18,464 18,478 18,492 16,556 16,569 16,581 16,594 78,000 81,000 84,000 78,000 78,050 78,100 78,150 78,050 78,100 78,150 78,200 16,474 16,488 16,502 16,516 12,981 12,994 13,006 13,019 16,826 16,840 16,854 16,868 15,106 15,119 15,131 15,144 81,000 81,050 81,100 81,150 81,050 81,100 81,150 81,200 17,314 17,328 17,342 17,356 13,731 13,744 13,756 13,769 17,666 17,680 17,694 17,708 15,856 15,869 15,881 15,894 84,000 84,050 84,100 84,150 84,050 84,100 84,150 84,200 18,154 18,168 18,182 18,196 14,481 14,494 14,506 14,519 18,506 18,520 18,534 18,548 16,606 16,619 16,631 16,644 78,200 78,250 78,300 78,350 78,250 78,300 78,350 78,400 16,530 16,544 16,558 16,572 13,031 13,044 13,056 13,069 16,882 16,896 16,910 16,924 15,156 15,169 15,181 15,194 81,200 81,250 81,300 81,350 81,250 81,300 81,350 81,400 17,370 17,384 17,398 17,412 13,781 13,794 13,806 13,819 17,722 17,736 17,750 17,764 15,906 15,919 15,931 15,944 84,200 84,250 84,300 84,350 84,250 84,300 84,350 84,400 18,210 18,224 18,238 18,252 14,531 14,544 14,556 14,569 18,562 18,576 18,590 18,604 16,656 16,669 16,681 16,694 78,400 78,450 78,500 78,550 78,450 78,500 78,550 78,600 16,586 16,600 16,614 16,628 13,081 13,094 13,106 13,119 16,938 16,952 16,966 16,980 15,206 15,219 15,231 15,244 81,400 81,450 81,500 81,550 81,450 81,500 81,550 81,600 17,426 17,440 17,454 17,468 13,831 13,844 13,856 13,869 17,778 17,792 17,806 17,820 15,956 15,969 15,981 15,994 84,400 84,450 84,500 84,550 84,450 84,500 84,550 84,600 18,266 18,280 18,294 18,308 14,581 14,594 14,606 14,619 18,618 18,632 18,646 18,660 16,706 16,719 16,731 16,744 78,600 78,650 78,700 78,750 78,650 78,700 78,750 78,800 16,642 16,656 16,670 16,684 13,131 13,144 13,156 13,169 16,994 17,008 17,022 17,036 15,256 15,269 15,281 15,294 81,600 81,650 81,700 81,750 81,650 81,700 81,750 81,800 17,482 17,496 17,510 17,524 13,881 13,894 13,906 13,919 17,834 17,848 17,862 17,876 16,006 16,019 16,031 16,044 84,600 84,650 84,700 84,750 84,650 84,700 84,750 84,800 18,322 18,336 18,350 18,364 14,631 14,644 14,656 14,669 18,674 18,688 18,702 18,716 16,756 16,769 16,781 16,794 78,800 78,850 78,900 78,950 78,850 78,900 78,950 79,000 16,698 16,712 16,726 16,740 13,181 13,194 13,206 13,219 17,050 17,064 17,078 17,092 15,306 15,319 15,331 15,344 81,800 81,850 81,900 81,950 81,850 81,900 81,950 82,000 17,538 17,552 17,566 17,580 13,931 13,944 13,956 13,969 17,890 17,904 17,918 17,932 16,056 16,069 16,081 16,094 84,800 84,850 84,900 84,950 84,850 84,900 84,950 85,000 18,378 18,392 18,406 18,420 14,681 14,694 14,706 14,719 18,730 18,744 18,758 18,772 16,806 16,819 16,831 16,844 79,000 82,000 85,000 79,000 79,050 79,100 79,150 79,050 79,100 79,150 79,200 16,754 16,768 16,782 16,796 13,231 13,244 13,256 13,269 17,106 17,120 17,134 17,148 15,356 15,369 15,381 15,394 82,000 82,050 82,100 82,150 82,050 82,100 82,150 82,200 17,594 17,608 17,622 17,636 13,981 13,994 14,006 14,019 17,946 17,960 17,974 17,988 16,106 16,119 16,131 16,144 85,000 85,050 85,100 85,150 85,050 85,100 85,150 85,200 18,434 18,448 18,462 18,476 14,731 14,744 14,756 14,769 18,786 18,800 18,814 18,828 16,856 16,869 16,881 16,894 79,200 79,250 79,300 79,350 79,250 79,300 79,350 79,400 16,810 16,824 16,838 16,852 13,281 13,294 13,306 13,319 17,162 17,176 17,190 17,204 15,406 15,419 15,431 15,444 82,200 82,250 82,300 82,350 82,250 82,300 82,350 82,400 17,650 17,664 17,678 17,692 14,031 14,044 14,056 14,069 18,002 18,016 18,030 18,044 16,156 16,169 16,181 16,194 85,200 85,250 85,300 85,350 85,250 85,300 85,350 85,400 18,490 18,504 18,518 18,532 14,781 14,794 14,806 14,819 18,842 18,856 18,870 18,884 16,906 16,919 16,931 16,944 79,400 79,450 79,500 79,550 79,450 79,500 79,550 79,600 16,866 16,880 16,894 16,908 13,331 13,344 13,356 13,369 17,218 17,232 17,246 17,260 15,456 15,469 15,481 15,494 82,400 82,450 82,500 82,550 82,450 82,500 82,550 82,600 17,706 17,720 17,734 17,748 14,081 14,094 14,106 14,119 18,058 18,072 18,086 18,100 16,206 16,219 16,231 16,244 85,400 85,450 85,500 85,550 85,450 85,500 85,550 85,600 18,546 18,560 18,574 18,588 14,831 14,844 14,856 14,869 18,898 18,912 18,926 18,940 16,956 16,969 16,981 16,994 79,600 79,650 79,700 79,750 79,650 79,700 79,750 79,800 16,922 16,936 16,950 16,964 13,381 13,394 13,406 13,419 17,274 17,288 17,302 17,316 15,506 15,519 15,531 15,544 82,600 82,650 82,700 82,750 82,650 82,700 82,750 82,800 17,762 17,776 17,790 17,804 14,131 14,144 14,156 14,169 18,114 18,128 18,142 18,156 16,256 16,269 16,281 16,294 85,600 85,650 85,700 85,750 85,650 85,700 85,750 85,800 18,602 18,616 18,630 18,644 14,881 14,894 14,906 14,919 18,954 18,968 18,982 18,996 17,006 17,019 17,031 17,044 79,800 79,850 79,900 79,950 79,850 79,900 79,950 80,000 16,978 16,992 17,006 17,020 13,431 13,444 13,456 13,469 17,330 17,344 17,358 17,372 15,556 15,569 15,581 15,594 82,800 82,850 82,900 82,950 82,850 82,900 82,950 83,000 17,818 17,832 17,846 17,860 14,181 14,194 14,206 14,219 18,170 18,184 18,198 18,212 16,306 16,319 16,331 16,344 85,800 85,850 85,900 85,950 85,850 85,900 85,950 86,000 18,658 18,672 18,686 18,700 14,931 14,944 14,956 14,969 19,010 19,024 19,038 19,052 17,056 17,069 17,081 17,094 (Continued on page 70) * This column must also be used by a qualifying widow(er). - 69 - Page 70 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than If line 42 (taxable income) is— And you are— Single Your tax is— Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— 86,000 Married filing jointly * Married filing separately Head of a household Your tax is— 89,000 92,000 86,000 86,050 86,100 86,150 86,050 86,100 86,150 86,200 18,714 18,728 18,742 18,756 14,981 14,994 15,006 15,019 19,066 19,080 19,094 19,108 17,106 17,119 17,131 17,144 89,000 89,050 89,100 89,150 89,050 89,100 89,150 89,200 19,554 19,568 19,582 19,596 15,731 15,744 15,756 15,769 19,906 19,920 19,934 19,948 17,856 17,869 17,881 17,894 92,000 92,050 92,100 92,150 92,050 92,100 92,150 92,200 20,394 20,408 20,422 20,436 16,481 16,494 16,506 16,519 20,881 20,897 20,914 20,930 18,606 18,619 18,631 18,644 86,200 86,250 86,300 86,350 86,250 86,300 86,350 86,400 18,770 18,784 18,798 18,812 15,031 15,044 15,056 15,069 19,122 19,136 19,150 19,164 17,156 17,169 17,181 17,194 89,200 89,250 89,300 89,350 89,250 89,300 89,350 89,400 19,610 19,624 19,638 19,652 15,781 15,794 15,806 15,819 19,962 19,976 19,990 20,006 17,906 17,919 17,931 17,944 92,200 92,250 92,300 92,350 92,250 92,300 92,350 92,400 20,450 20,464 20,478 20,492 16,531 16,544 16,556 16,569 20,947 20,963 20,980 20,996 18,656 18,669 18,681 18,694 86,400 86,450 86,500 86,550 86,450 86,500 86,550 86,600 18,826 18,840 18,854 18,868 15,081 15,094 15,106 15,119 19,178 19,192 19,206 19,220 17,206 17,219 17,231 17,244 89,400 89,450 89,500 89,550 89,450 89,500 89,550 89,600 19,666 19,680 19,694 19,708 15,831 15,844 15,856 15,869 20,023 20,039 20,056 20,072 17,956 17,969 17,981 17,994 92,400 92,450 92,500 92,550 92,450 92,500 92,550 92,600 20,506 20,520 20,534 20,548 16,581 16,594 16,606 16,619 21,013 21,029 21,046 21,062 18,706 18,719 18,731 18,744 86,600 86,650 86,700 86,750 86,650 86,700 86,750 86,800 18,882 18,896 18,910 18,924 15,131 15,144 15,156 15,169 19,234 19,248 19,262 19,276 17,256 17,269 17,281 17,294 89,600 89,650 89,700 89,750 89,650 89,700 89,750 89,800 19,722 19,736 19,750 19,764 15,881 15,894 15,906 15,919 20,089 20,105 20,122 20,138 18,006 18,019 18,031 18,044 92,600 92,650 92,700 92,750 92,650 92,700 92,750 92,800 20,562 20,576 20,590 20,604 16,631 16,644 16,656 16,669 21,079 21,095 21,112 21,128 18,756 18,769 18,781 18,794 86,800 86,850 86,900 86,950 86,850 86,900 86,950 87,000 18,938 18,952 18,966 18,980 15,181 15,194 15,206 15,219 19,290 19,304 19,318 19,332 17,306 17,319 17,331 17,344 89,800 89,850 89,900 89,950 89,850 89,900 89,950 90,000 19,778 19,792 19,806 19,820 15,931 15,944 15,956 15,969 20,155 20,171 20,188 20,204 18,056 18,069 18,081 18,094 92,800 92,850 92,900 92,950 92,850 92,900 92,950 93,000 20,618 20,632 20,646 20,660 16,681 16,694 16,706 16,719 21,145 21,161 21,178 21,194 18,806 18,819 18,831 18,844 87,000 90,000 93,000 87,000 87,050 87,100 87,150 87,050 87,100 87,150 87,200 18,994 19,008 19,022 19,036 15,231 15,244 15,256 15,269 19,346 19,360 19,374 19,388 17,356 17,369 17,381 17,394 90,000 90,050 90,100 90,150 90,050 90,100 90,150 90,200 19,834 19,848 19,862 19,876 15,981 15,994 16,006 16,019 20,221 20,237 20,254 20,270 18,106 18,119 18,131 18,144 93,000 93,050 93,100 93,150 93,050 93,100 93,150 93,200 20,674 20,688 20,702 20,716 16,731 16,744 16,756 16,769 21,211 21,227 21,244 21,260 18,856 18,869 18,881 18,894 87,200 87,250 87,300 87,350 87,250 87,300 87,350 87,400 19,050 19,064 19,078 19,092 15,281 15,294 15,306 15,319 19,402 19,416 19,430 19,444 17,406 17,419 17,431 17,444 90,200 90,250 90,300 90,350 90,250 90,300 90,350 90,400 19,890 19,904 19,918 19,932 16,031 16,044 16,056 16,069 20,287 20,303 20,320 20,336 18,156 18,169 18,181 18,194 93,200 93,250 93,300 93,350 93,250 93,300 93,350 93,400 20,730 20,744 20,758 20,772 16,781 16,794 16,806 16,819 21,277 21,293 21,310 21,326 18,906 18,919 18,931 18,944 87,400 87,450 87,500 87,550 87,450 87,500 87,550 87,600 19,106 19,120 19,134 19,148 15,331 15,344 15,356 15,369 19,458 19,472 19,486 19,500 17,456 17,469 17,481 17,494 90,400 90,450 90,500 90,550 90,450 90,500 90,550 90,600 19,946 19,960 19,974 19,988 16,081 16,094 16,106 16,119 20,353 20,369 20,386 20,402 18,206 18,219 18,231 18,244 93,400 93,450 93,500 93,550 93,450 93,500 93,550 93,600 20,786 20,800 20,814 20,828 16,831 16,844 16,856 16,869 21,343 21,359 21,376 21,392 18,956 18,969 18,981 18,994 87,600 87,650 87,700 87,750 87,650 87,700 87,750 87,800 19,162 19,176 19,190 19,204 15,381 15,394 15,406 15,419 19,514 19,528 19,542 19,556 17,506 17,519 17,531 17,544 90,600 90,650 90,700 90,750 90,650 90,700 90,750 90,800 20,002 20,016 20,030 20,044 16,131 16,144 16,156 16,169 20,419 20,435 20,452 20,468 18,256 18,269 18,281 18,294 93,600 93,650 93,700 93,750 93,650 93,700 93,750 93,800 20,842 20,856 20,870 20,884 16,881 16,894 16,906 16,919 21,409 21,425 21,442 21,458 19,006 19,019 19,031 19,044 87,800 87,850 87,900 87,950 87,850 87,900 87,950 88,000 19,218 19,232 19,246 19,260 15,431 15,444 15,456 15,469 19,570 19,584 19,598 19,612 17,556 17,569 17,581 17,594 90,800 90,850 90,900 90,950 90,850 90,900 90,950 91,000 20,058 20,072 20,086 20,100 16,181 16,194 16,206 16,219 20,485 20,501 20,518 20,534 18,306 18,319 18,331 18,344 93,800 93,850 93,900 93,950 93,850 93,900 93,950 94,000 20,898 20,912 20,926 20,940 16,931 16,944 16,956 16,969 21,475 21,491 21,508 21,524 19,056 19,069 19,081 19,094 88,000 91,000 94,000 88,000 88,050 88,100 88,150 88,050 88,100 88,150 88,200 19,274 19,288 19,302 19,316 15,481 15,494 15,506 15,519 19,626 19,640 19,654 19,668 17,606 17,619 17,631 17,644 91,000 91,050 91,100 91,150 91,050 91,100 91,150 91,200 20,114 20,128 20,142 20,156 16,231 16,244 16,256 16,269 20,551 20,567 20,584 20,600 18,356 18,369 18,381 18,394 94,000 94,050 94,100 94,150 94,050 94,100 94,150 94,200 20,954 20,968 20,982 20,996 16,981 16,994 17,006 17,019 21,541 21,557 21,574 21,590 19,106 19,119 19,131 19,144 88,200 88,250 88,300 88,350 88,250 88,300 88,350 88,400 19,330 19,344 19,358 19,372 15,531 15,544 15,556 15,569 19,682 19,696 19,710 19,724 17,656 17,669 17,681 17,694 91,200 91,250 91,300 91,350 91,250 91,300 91,350 91,400 20,170 20,184 20,198 20,212 16,281 16,294 16,306 16,319 20,617 20,633 20,650 20,666 18,406 18,419 18,431 18,444 94,200 94,250 94,300 94,350 94,250 94,300 94,350 94,400 21,010 21,024 21,038 21,052 17,031 17,044 17,056 17,069 21,607 21,623 21,640 21,656 19,156 19,169 19,181 19,194 88,400 88,450 88,500 88,550 88,450 88,500 88,550 88,600 19,386 19,400 19,414 19,428 15,581 15,594 15,606 15,619 19,738 19,752 19,766 19,780 17,706 17,719 17,731 17,744 91,400 91,450 91,500 91,550 91,450 91,500 91,550 91,600 20,226 20,240 20,254 20,268 16,331 16,344 16,356 16,369 20,683 20,699 20,716 20,732 18,456 18,469 18,481 18,494 94,400 94,450 94,500 94,550 94,450 94,500 94,550 94,600 21,066 21,080 21,094 21,108 17,081 17,094 17,106 17,119 21,673 21,689 21,706 21,722 19,206 19,219 19,231 19,244 88,600 88,650 88,700 88,750 88,650 88,700 88,750 88,800 19,442 19,456 19,470 19,484 15,631 15,644 15,656 15,669 19,794 19,808 19,822 19,836 17,756 17,769 17,781 17,794 91,600 91,650 91,700 91,750 91,650 91,700 91,750 91,800 20,282 20,296 20,310 20,324 16,381 16,394 16,406 16,419 20,749 20,765 20,782 20,798 18,506 18,519 18,531 18,544 94,600 94,650 94,700 94,750 94,650 94,700 94,750 94,800 21,122 21,136 21,150 21,164 17,131 17,144 17,156 17,169 21,739 21,755 21,772 21,788 19,256 19,269 19,281 19,294 91,800 91,850 91,850 91,900 91,900 91,950 91,950 92,000 widow(er). 20,338 20,352 20,366 20,380 16,431 16,444 16,456 16,469 20,815 20,831 20,848 20,864 18,556 18,569 18,581 18,594 94,800 94,850 94,900 94,950 94,850 94,900 94,950 95,000 21,178 21,192 21,206 21,220 17,181 17,194 17,206 17,219 21,805 21,821 21,838 21,854 19,306 19,319 19,331 19,344 88,800 88,850 19,498 88,850 88,900 19,512 88,900 88,950 19,526 88,950 89,000 19,540 * This column must also 15,681 19,850 17,806 15,694 19,864 17,819 15,706 19,878 17,831 15,719 19,892 17,844 be used by a qualifying (Continued on page 71) - 70 - Page 71 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Table—Continued If line 42 (taxable income) is— At least But less than If line 42 (taxable income) is— And you are— Single Married filing jointly * Married filing separately Head At of a least household But less than And you are— Single Your tax is— Married filing jointly * Married filing separately Head of a household Your tax is— 95,000 98,000 95,000 95,050 95,100 95,150 95,050 95,100 95,150 95,200 21,234 21,248 21,262 21,276 17,231 17,244 17,256 17,269 21,871 21,887 21,904 21,920 19,356 19,369 19,381 19,394 95,200 95,250 95,300 95,350 95,250 95,300 95,350 95,400 21,290 21,304 21,318 21,332 17,281 17,294 17,306 17,319 21,937 21,953 21,970 21,986 19,406 19,419 19,431 19,444 95,400 95,450 95,500 95,550 95,450 95,500 95,550 95,600 21,346 21,360 21,374 21,388 17,331 17,344 17,356 17,369 22,003 22,019 22,036 22,052 19,456 19,469 19,481 19,494 95,600 95,650 95,700 95,750 95,650 95,700 95,750 95,800 21,402 21,416 21,430 21,444 17,381 17,394 17,406 17,419 22,069 22,085 22,102 22,118 19,506 19,519 19,531 19,544 95,800 95,850 95,900 95,950 95,850 95,900 95,950 96,000 21,458 21,472 21,486 21,500 17,431 17,444 17,456 17,469 22,135 22,151 22,168 22,184 19,556 19,569 19,581 19,594 96,000 98,000 98,050 98,100 98,150 98,200 98,250 98,300 98,350 98,400 98,450 98,500 98,550 98,600 98,650 98,700 98,750 98,800 98,850 98,900 98,950 98,050 98,100 98,150 98,200 98,250 98,300 98,350 98,400 98,450 98,500 98,550 98,600 98,650 98,700 98,750 98,800 98,850 98,900 98,950 99,000 22,074 22,088 22,102 22,116 22,130 22,144 22,158 22,172 22,186 22,200 22,214 22,228 22,242 22,256 22,270 22,284 22,298 22,312 22,326 22,340 17,981 17,994 18,006 18,019 18,031 18,044 18,056 18,069 18,081 18,094 18,106 18,119 18,131 18,144 18,156 18,169 18,181 18,194 18,206 18,219 22,861 22,877 22,894 22,910 22,927 22,943 22,960 22,976 22,993 23,009 23,026 23,042 23,059 23,075 23,092 23,108 23,125 23,141 23,158 23,174 20,106 20,119 20,131 20,144 20,156 20,169 20,181 20,194 20,206 20,219 20,231 20,244 20,256 20,269 20,281 20,294 20,306 20,319 20,331 20,344 22,354 22,368 22,382 22,396 22,410 22,424 22,438 22,452 22,466 22,480 22,494 22,508 22,522 22,536 22,550 22,564 22,578 22,592 22,606 22,620 18,231 18,244 18,256 18,269 18,281 18,294 18,306 18,319 18,331 18,344 18,356 18,369 18,381 18,394 18,406 18,419 18,431 18,444 18,456 18,469 23,191 23,207 23,224 23,240 23,257 23,273 23,290 23,306 23,323 23,339 23,356 23,372 23,389 23,405 23,422 23,438 23,455 23,471 23,488 23,504 20,356 20,369 20,381 20,394 20,406 20,419 20,431 20,444 20,456 20,469 20,481 20,494 20,506 20,519 20,531 20,544 20,556 20,569 20,581 20,594 99,000 96,000 96,050 96,100 96,150 96,050 96,100 96,150 96,200 21,514 21,528 21,542 21,556 17,481 17,494 17,506 17,519 22,201 22,217 22,234 22,250 19,606 19,619 19,631 19,644 96,200 96,250 96,300 96,350 96,250 96,300 96,350 96,400 21,570 21,584 21,598 21,612 17,531 17,544 17,556 17,569 22,267 22,283 22,300 22,316 19,656 19,669 19,681 19,694 96,400 96,450 96,500 96,550 96,450 96,500 96,550 96,600 21,626 21,640 21,654 21,668 17,581 17,594 17,606 17,619 22,333 22,349 22,366 22,382 19,706 19,719 19,731 19,744 96,600 96,650 96,700 96,750 96,650 96,700 96,750 96,800 21,682 21,696 21,710 21,724 17,631 17,644 17,656 17,669 22,399 22,415 22,432 22,448 19,756 19,769 19,781 19,794 96,800 96,850 96,900 96,950 96,850 96,900 96,950 97,000 21,738 21,752 21,766 21,780 17,681 17,694 17,706 17,719 22,465 22,481 22,498 22,514 19,806 19,819 19,831 19,844 99,000 99,050 99,100 99,150 99,200 99,250 99,300 99,350 99,400 99,450 99,500 99,550 99,600 99,650 99,700 99,750 99,800 99,850 99,900 99,950 99,050 99,100 99,150 99,200 99,250 99,300 99,350 99,400 99,450 99,500 99,550 99,600 99,650 99,700 99,750 99,800 99,850 99,900 99,950 100,000 97,000 97,000 97,050 97,100 97,150 97,050 97,100 97,150 97,200 21,794 21,808 21,822 21,836 17,731 17,744 17,756 17,769 22,531 22,547 22,564 22,580 19,856 19,869 19,881 19,894 97,200 97,250 97,300 97,350 97,250 97,300 97,350 97,400 21,850 21,864 21,878 21,892 17,781 17,794 17,806 17,819 22,597 22,613 22,630 22,646 19,906 19,919 19,931 19,944 97,400 97,450 97,500 97,550 97,450 97,500 97,550 97,600 21,906 21,920 21,934 21,948 17,831 17,844 17,856 17,869 22,663 22,679 22,696 22,712 19,956 19,969 19,981 19,994 97,600 97,650 97,700 97,750 97,650 97,700 97,750 97,800 21,962 21,976 21,990 22,004 17,881 17,894 17,906 17,919 22,729 22,745 22,762 22,778 20,006 20,019 20,031 20,044 97,800 97,850 97,900 97,950 97,850 97,900 97,950 98,000 22,018 22,032 22,046 22,060 17,931 17,944 17,956 17,969 22,795 22,811 22,828 22,844 20,056 20,069 20,081 20,094 $100,000 or over — use the Tax Computation Worksheet on page 72 * This column must also be used by a qualifying widow(er). - 71 - Page 72 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 Tax Computation Worksheet—Line 43 ! See the instructions for line 43 that begin on page 33 to see if you must use the worksheet below to figure your tax. CAUTION Section A—Use if your filing status is Single. Complete the row below that applies to you. (a) Enter the amount from line 42 Taxable income. If line 42 is — (b) Multiplication amount (c) Multiply (a) by (b) (d) Subtraction amount Tax. Subtract (d) from (c). Enter the result here and on Form 1040, line 43 At least $100,000 but not over $146,750 $ × 28% (.28) $ $ 5,373.00 $ Over $146,750 but not over $319,100 $ × 33% (.33) $ $ 12,710.50 $ Over $319,100 $ × 35% (.35) $ $ 19,092.50 $ Section B—Use if your filing status is Married filing jointly or qualifying widow(er). Complete the row below that applies to you. (a) Enter the amount from line 42 Taxable income. If line 42 is — (b) Multiplication amount (c) Multiply (a) by (b) (d) Subtraction amount Tax. Subtract (d) from (c). Enter the result here and on Form 1040, line 43 At least $100,000 but not over $117,250 $ × 25% (.25) $ $ 6,525.00 $ Over $117,250 but not over $178,650 $ × 28% (.28) $ $ 10,042.50 $ Over $178,650 but not over $319,100 $ × 33% (.33) $ $ 18,975.00 $ Over $319,100 $ × 35% (.35) $ $ 25,357.00 $ Section C—Use if your filing status is Married filing separately. Complete the row below that applies to you. (a) Enter the amount from line 42 Taxable income. If line 42 is — (b) Multiplication amount (c) Multiply (a) by (b) (d) Subtraction amount Tax. Subtract (d) from (c). Enter the result here and on Form 1040, line 43 At least $100,000 but not over $159,550 $ × 33% (.33) $ $ 9,487.50 $ Over $159,550 $ × 35% (.35) $ $ 12,678.50 $ Section D—Use if your filing status is Head of household. Complete the row below that applies to you. (a) Enter the amount from line 42 Taxable income. If line 42 is — (b) Multiplication amount (c) Multiply (a) by (b) (d) Subtraction amount Tax. Subtract (d) from (c). Enter the result here and on Form 1040, line 43 At least $100,000 but not over $100,500 $ × 25% (.25) $ $ 4,400.00 $ Over $100,500 but not over $162,700 $ × 28% (.28) $ $ 7,415.00 $ Over $162,700 but not over $319,100 $ × 33% (.33) $ $ 15,550.00 $ Over $319,100 $ × 35% (.35) $ $ 21,932.00 $ - 72 - 4 I.R.S. SPECIFICATIONS TO BE REMOVED BEFORE PRINTING INSTRUCTIONS TO PRINTERS PACKAGE 1040-OTC, FOLIO 73 OF 132 MARGINS; TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD PAPER: WHITE WRITING, SUB. 20. INK: BLACK FLAT SIZE: 216mm (81⁄2 ") x 279mm (11") PERFORATE: ON FOLD DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT Layer 1 Color=Solid Black The most frequently ordered forms and publications are listed on the order blank below. We will mail you two copies of each form and one copy of each publication you order. To help reduce waste, please order only the items you need to prepare your return. Order Blank for Forms and Publications For faster ways of getting the items you need, such as by Internet or fax, see page 7. TIP How To Use the Order Blank Circle the items you need on the order blank below. Use the blank spaces to order items not listed. If you need more space, attach a separate sheet of paper. Print or type your name and address accurately in the space provided below. An accurate address will ensure delivery of your order. Cut the order blank on the dotted line. Enclose the order blank in your own envelope and send it to the IRS address shown below that applies to you. You should receive your order within 10 days after we receive your request. Do not send your tax return to any of the addresses listed on this page. Instead, see the back cover. Where To Mail Your Order Blank for Free Forms and Publications IF you live in the . . . THEN mail to . . . AT this address . . . Western United States Western Area Distribution Center Rancho Cordova, CA 95743-0001 Central United States Central Area Distribution Center P.O. Box 8903 Bloomington, IL 61702-8903 Eastern United States or a foreign country Eastern Area Distribution Center P.O. Box 85074 Richmond, VA 23261-5074 䊱 Order Blank Name Fill in your name and address. Postal mailing address Cut here 䊱 Apt./Suite/Room City State ZIP code International postal code Foreign country Daytime phone number ( ) You can download all these items from the Internet at www.irs.gov or place an electronic order for them. The items in bold can be picked up at many IRS offices, post offices, and libraries. Circle the forms and publications you need. The instructions for any form you order will be included. N 1040 Schedule F (1040) Schedule 3 (1040A) 4506 8822 Pub. 501 Pub. 535 Pub. 970 Schedules A&B (1040) Schedule H (1040) 1040EZ 4562 8829 Pub. 502 Pub. 550 Pub. 972 Schedule C (1040) Schedule J (1040) 1040-ES (2005) 4868 8863 Pub. 505 Pub. 554 Schedule C-EZ (1040) Schedule R (1040) 1040-V 6251 9465 Pub. 523 Pub. 575 Schedule D (1040) Schedule SE (1040) 1040X 8283 Pub. 1 Pub. 525 Pub. 590 Schedule D-1 (1040) 1040A 2106 8582 Pub. 17 Pub. 527 Pub. 596 Schedule E (1040) Schedule 1 (1040A) 2106-EZ 8606 Pub. 334 Pub. 529 Pub. 910 Schedule EIC (1040A or 1040) Schedule 2 (1040A) 2441 8812 Pub. 463 Pub. 533 Pub. 926 - 73 - Page 74 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Major Categories of Federal Income and Outlays for Fiscal Year 2003 Income and Outlays. These pie charts show the relative sizes of the major categories of federal income and outlays for fiscal year 2003. Income Outlays Social security, Medicare, and unemployment and other retirement taxes 33% Personal income taxes 37% Law enforcement and general government 3% Social security, Medicare, and other retirement 1 37% Social programs 4 21% Borrowing to cover deficit 17% Corporate income taxes 6% On or before the first Monday in February of each year, the President is required by law to submit to the Congress a budget proposal for the fiscal year that begins the following October. The budget plan sets forth the President’s proposed receipts, spending, and the surplus or deficit for the Federal Government. The plan includes recommendations for new legislation as well as recommendations to change, eliminate, and add programs. After receiving the President’s proposal, the Congress reviews it and makes changes. It first passes a budget resolution setting its own targets for receipts, outlays, and the surplus or deficit. Next, individual spending and revenue bills that are consistent with the goals of the budget resolution are enacted. In fiscal year 2003 (which began on October 1, 2002, and ended on September 30, 2003), federal income was $1.8 trillion and Excise, customs, estate, gift, and miscellaneous taxes 7% Physical, human, and community development 3 10% outlays were $2.2 trillion, leaving a deficit of $0.4 trillion. Footnotes for Certain Federal Outlays 1. Social security, Medicare, and other retirement: These programs provide income support for the retired and disabled and medical care for the elderly. 2. National defense, veterans, and foreign affairs: About 18% of outlays were to equip, modernize, and pay our armed forces and to fund other national defense activities; about 3% were for veterans benefits and services; and about 1% were for international activities, including military and economic assistance to foreign countries and the maintenance of U.S. embassies abroad. Net interest on the debt 7% National defense, veterans, and foreign affairs 2 22% 3. Physical, human, and community development: These outlays were for agriculture; natural resources; environment; transportation; aid for elementary and secondary education and direct assistance to college students; job training; deposit insurance, commerce and housing credit, and community development; and space, energy, and general science programs. 4. Social programs: About 14% of total outlays were for Medicaid, food stamps, temporary assistance for needy families, supplemental security income, and related programs; and the remaining outlays were for health research and public health programs, unemployment compensation, assisted housing, and social services. Note. The percentages on this page exclude undistributed offsetting receipts, which were $54 billion in fiscal year 2003. In the budget, these receipts are offset against spending in figuring the outlay totals shown above. These receipts are for the U.S. Government’s share of its employee retirement programs, rents and royalties on the Outer Continental Shelf, and proceeds from the sale of assets. - 74 - Page 75 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Disclosure, Privacy Act, and Paperwork Reduction Act Notice 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 our legal right to ask for the information, why we are asking for it, and how it will be used. We must also tell you 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. This notice applies to all papers you file with us, including this tax return. It also applies to any questions we need to ask you so we can complete, correct, or process your return; figure your tax; and collect tax, interest, or penalties. Our legal right to ask for information is Internal Revenue Code sections 6001, 6011, and 6012(a), and their regulations. They say that you must file a return or statement with us for any tax you are liable for. Your response is mandatory under these sections. Code section 6109 requires that you provide your social security number or individual taxpayer identification number on what you file. This is so we know who you are, and can process your return and other papers. You must fill in all parts of the tax form that apply to you. But you do not have to check the boxes for the Presidential Election Campaign Fund or for the third-party designee. You also do not have to provide your daytime phone number. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. We ask for tax return information to carry out the tax laws of the United States. We need it to figure and collect the right amount of tax. If you do not file a return, do not provide the information we ask for, or provide fraudulent information, you may be charged penalties and be subject to criminal prosecution. We may also have to disallow the exemptions, exclusions, credits, deductions, or adjustments shown on the tax return. This could make the tax higher or delay any refund. Interest may also be charged. Generally, tax returns and return information are confidential, as stated in Code section 6103. However, Code section 6103 allows or requires the Internal Revenue Service to disclose or give the information shown on your tax return to others as described in the Code. For example, we may disclose your tax information to the Department of Justice to enforce the tax laws, both civil and criminal, and to cities, states, the District of Columbia, U.S. commonwealths or possessions, and certain foreign governments to carry out their tax laws. We may disclose your tax information to the Department of Treasury and contractors for tax administration purposes; and to other persons as necessary to obtain information which we cannot get in any other way in order to determine the amount of or to collect the tax you owe. We may disclose your tax information to the Comptroller General of the United States to permit the Comptroller General to review the Internal Revenue Service. We may disclose your tax information to Committees of Congress; federal, state, and local child support agencies; and to other federal agencies for the purposes of determining entitlement for benefits or the eligi- bility for and the repayment of loans. We may also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. Please keep this notice with your records. It may help you if we ask you for other information. If you have questions about the rules for filing and giving information, please call or visit any Internal Revenue Service office. The Time It Takes To Prepare Your Return We try to create forms and instructions that can be easily understood. Often this is difficult to do because our tax laws are very complex. For some people with income mostly from wages, filling in the forms is easy. For others who have businesses, pensions, stocks, rental income, or other investments, it is more difficult. We Welcome Comments on Forms If you have comments concerning the accuracy of the time estimates shown below or suggestions for making these forms simpler, we would be happy to hear from you. You can email us at *taxforms@irs.gov. Please put “Forms Comment” on the subject line. Or you can write to Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, Washington, DC 20224. Do not send your return to this address. Instead, see the back cover. Estimated Preparation Time The time needed to complete and file Form 1040, its schedules, and accompanying worksheets will vary depending on individual circumstances. The estimated average times are: Copying, Learning assembling, about and sending the law or Preparing the form Form Recordkeeping the form the form to the IRS Totals Form 1040 Sch. A Sch. B Sch. C Sch. C-EZ Sch. D Sch. D-1 Sch. E Sch. EIC Sch. F: Cash Method Accrual Method Sch. H Sch. J Sch. R Sch. SE: Short Long 2 hr., 46 min. 3 hr., 4 min. 33 min. 6 hr., 4 min. 45 min. 55 min. 13 min. 3 hr. ----- 3 hr., 58 39 min. 8 min. 1 hr., 51 3 min. 2 hr., 30 1 min. 1 hr., 13 1 min. 3 hr., 29 min. 3 hr., 36 min. 1 hr., 38 min. 19 min. 19 min. 36 26 30 13 16 13 min. 26 min. 14 min. 20 min. min. 6 hr., 17 1 hr., 34 25 min. 2 hr., 19 35 min. 2 hr., 18 11 min. 1 hr., 27 13 min. min. min. min. min. min. min. min. min. - 75 - min. min. 34 20 20 41 20 27 34 34 20 min. min. min. min. min. min. min. min. min. 13 hr., 35 min. 5 hr., 37 min. 1 hr., 26 min. 10 hr., 55 min. 1 hr., 43 min. 6 hr., 10 min. 59 min. 6 hr., 14 min. 34 min. 1 hr., 27 min. 1 hr., 25 min. 53 min. 2 hr., 16 min. 35 min. 20 20 34 20 34 min. min. min. min. min. 5 5 3 3 1 13 min. 35 min. 13 min. 20 min. min. min. min. hr., hr., hr., hr., hr., 52 min. 47 min. 35 min. 8 min. 44 min. 53 min. 1 hr., 41 min. Page 76 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2004 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 them to figure your tax. Instead, see the instructions for line 43 that begin on page 33. CAUTION Schedule X—If your filing status is Single If your taxable income is: Over— The tax is: of the amount over— But not over— $0 $7,150 10% $0 7,150 29,050 $715.00 + 15% 7,150 29,050 70,350 4,000.00 + 25% 29,050 70,350 146,750 14,325.00 + 28% 70,350 146,750 319,100 35,717.00 + 33% 146,750 92,592.50 + 35% 319,100 319,100 Schedule Y-1—If your filing status is Married filing jointly or Qualifying widow(er) If your taxable income is: Over— $0 The tax is: of the amount over— But not over— $14,300 10% 14,300 58,100 $1,430.00 + 15% 14,300 58,100 117,250 8,000.00 + 25% 58,100 117,250 178,650 22,787.50 + 28% 117,250 178,650 319,100 39,979.50 + 33% 178,650 86,328.00 + 35% 319,100 319,100 $0 Schedule Y-2—If your filing status is Married filing separately If your taxable income is: Over— The tax is: of the amount over— But not over— $0 $7,150 10% $0 7,150 29,050 $715.00 + 15% 7,150 29,050 29,050 58,625 4,000.00 + 25% 58,625 89,325 11,393.75 + 28% 58,625 89,325 159,550 19,989.75 + 33% 89,325 43,164.00 + 35% 159,550 159,550 Schedule Z—If your filing status is Head of household If your taxable income is: Over— The tax is: of the amount over— But not over— $0 $10,200 10% $0 10,200 38,900 $1,020.00 + 15% 10,200 38,900 100,500 5,325.00 + 25% 38,900 100,500 162,700 20,725.00 + 28% 100,500 162,700 319,100 38,141.00 + 33% 162,700 89,753.00 + 35% 319,100 319,100 - 76 - PAGER/SGML Userid: ________ Fileid: I1040SAB.XML Leading adjust: -5/0% (29-Oct-2004) ❏ Draft (Init. & date) ❏ Ok to Print Filename: D:\USERS\mmgood00\documents\Epicfiles\I1040SAB.XML Page 1 of 8 of 2004 Instructions for Schedules A & B (Form 1040)10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedules A & B (Form 1040) Use Schedule A (Form 1040) to figure your itemized deductions. In most cases, your federal tax will be less if you take the larger of your itemized deductions or your standard Instructions for income deduction. If you itemize, you can deduct a part of your medical and dental expenses and unSchedule A, reimbursed employee business expenses, and amounts you paid for certain taxes, interest, contributions, and miscellaneous expenses. You can also deduct certain casualty and theft losses. Itemized Do not include on Schedule A items deducted elsewhere, such as on Form 1040 or Schedule C, C-EZ, E, or F. Deductions What’s New self-employed health insurance deduction you claimed on Form 1040, line 31. You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A. Generally, you can use either your actual expenses or the Optional State Sales Tax Tables to figure your state and local general sales tax deduction. See the instructions for line 5 that begin on page A-2 for details. Note. If, during 2004, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, you must reduce your insurance premiums by any amounts used to figure the health coverage tax credit. See the instructions for line 1 on page A-2. Medical and Dental Expenses You cannot deduct insurance premiums paid with pretax dollars because the premiums are not included in box 1 of your Form(s) W-2. You can deduct only the part of your medical and dental expenses that exceeds 7.5% of the amount on Form 1040, line 37. Pub. 502 discusses the types of expenses that you can and cannot deduct. It also explains when you can deduct capital expenses and special care expenses for disabled persons. If you received a distribution from a health savings account or a medical savings account in 2004, see Pub. 969 to figure your deduction. Examples of Medical and Dental Payments You Can Deduct To the extent you were not reimbursed, you can deduct what you paid for: • Insurance premiums for medical and dental care, including premiums for qualified long-term care contracts as defined in Pub. 502. But see Limit on long-term care premiums you can deduct on this page. Reduce the insurance premiums by any • Prescription medicines or insulin. • Acupuncturists, chiropractors, den- tists, eye doctors, medical doctors, occupational therapists, osteopathic doctors, physical therapists, podiatrists, psychiatrists, psychoanalysts (medical care only), and psychologists. • Medical examinations, X-ray and laboratory services, insulin treatment, and whirlpool baths your doctor ordered. • Nursing help (including your share of the employment taxes paid). If you paid someone to do both nursing and housework, you can deduct only the cost of the nursing help. • Hospital care (including meals and lodging), clinic costs, and lab fees. • Qualified long-term care services (see Pub. 502). • The supplemental part of Medicare insurance (Medicare B). • A program to stop smoking and for prescription medicines to alleviate nicotine withdrawal. A-1 Cat. No. 24328L • A weight-loss program as treatment for a specific disease (including obesity) diagnosed by a doctor. • Medical treatment at a center for drug or alcohol addiction. • Medical aids such as eyeglasses, contact lenses, hearing aids, braces, crutches, wheelchairs, and guide dogs, including the cost of maintaining them. • Surgery to improve defective vision, such as laser eye surgery or radial keratotomy. • Lodging expenses (but not meals) while away from home to receive medical care in a hospital or a medical care facility related to a hospital, provided there was no significant element of personal pleasure, recreation, or vacation in the travel. Do not deduct more than $50 a night for each eligible person. • Ambulance service and other travel costs to get medical care. If you used your own car, you can claim what you spent for gas and oil to go to and from the place you received the care; or you can claim 14 cents a mile. Add parking and tolls to the amount you claim under either method. Note. Certain medical expenses paid out of a deceased taxpayer’s estate can be claimed on the deceased taxpayer’s final return. See Pub. 502 for details. Limit on long-term care premiums you can deduct. The amount you can deduct for qualified long-term care contracts (as defined in Pub. 502) depends on the age, at the end of 2004, of the person for whom the premiums were paid. See the chart on page A-2 for details. Page 2 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. IF the person was, at the end of 2004, age . . . THEN the most you may deduct is . . . 40 or under $ 260 41–50 $ 490 51–60 $ 980 61–70 $ 2,600 71 or older $ 3,250 Examples of Medical and Dental Payments You Cannot Deduct • The basic cost of Medicare insurance (Medicare A). If you were age 65 or older but not entitled to social security TIP benefits, you can deduct premiums you voluntarily paid for Medicare A coverage. • The cost of diet food. • Cosmetic surgery unless it was neces- sary to improve a deformity related to a congenital abnormality, an injury from an accident or trauma, or a disfiguring disease. • Life insurance or income protection policies. • The Medicare tax on your wages and tips or the Medicare tax paid as part of the self-employment tax or household employment taxes. • Nursing care for a healthy baby. But you may be able to take a credit for the amount you paid. See the instructions for Form 1040, line 47. • Illegal operations or drugs. • Imported drugs not approved by the U.S. Food and Drug Administration (FDA). This includes foreign-made versions of U.S.-approved drugs manufactured without FDA approval. • Nonprescription medicines (including nicotine gum and certain nicotine patches). • Travel your doctor told you to take for rest or a change. • Funeral, burial, or cremation costs. Line 1 Medical and Dental Expenses Enter the total of your medical and dental expenses (see page A-1), after you reduce these expenses by any payments received from insurance or other sources. See Reimbursements on this page. Do not forget to include insurance premiums you paid for TIP medical and dental care. But if you claimed the self-employed health insurance deduction on Form 1040, line 31, reduce the premiums by the amount on line 31. Note. If, during 2004, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, you must complete Form 8885 before completing Schedule A, line 1. When figuring the amount of insurance premiums you can deduct on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Also, subtract the amount shown on Form 8885, line 4 (reduced by any advance payments shown on line 6 of that form), from the total insurance premiums you paid. • Customs duties. • Federal estate and gift taxes. But see the instructions for line 27 on page A-6. • Certain state and local taxes, including: tax on gasoline, car inspection fees, assessments for sidewalks or other improvements to your property, tax you paid for someone else, and license fees (marriage, driver’s, dog, etc.). Line 5 State and Local Income or General Sales Taxes Whose medical and dental expenses can you include? You can include medical and dental bills you paid for: • Yourself and your spouse. • All dependents you claim on your return. • Your child whom you do not claim as a dependent because of the rules explained in Pub. 501 for children of divorced or separated parents. • Any person you could have claimed as a dependent on your return if that person had not received $3,100 or more of gross income or had not filed a joint return. Example. You provided over half of your mother’s support but cannot claim her as a dependent because she received wages of $3,100 in 2004. You can include on line 1 any medical and dental expenses you paid in 2004 for your mother. Reimbursements. If your insurance company paid the provider directly for part of your expenses, and you paid only the amount that remained, include on line 1 only the amount you paid. If you received a reimbursement in 2004 for medical or dental expenses you paid in 2004, reduce your 2004 expenses by this amount. If you received a reimbursement in 2004 for prior year medical or dental expenses, do not reduce your 2004 expenses by this amount. But if you deducted the expenses in the earlier year and the deduction reduced your tax, you must include the reimbursement in income on Form 1040, line 21. See Pub. 502 for details on how to figure the amount to include. Cafeteria plans. Do not include on line 1 insurance premiums paid by an employer-sponsored health insurance plan (cafeteria plan) unless the premiums are included in box 1 of your Form(s) W-2. Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form(s) W-2. Taxes You Paid Taxes You Cannot Deduct • Federal income and excise taxes. • Social security, Medicare, federal un- employment (FUTA), and railroad retirement (RRTA) taxes. A-2 You can elect to deduct state and local general sales taxes instead of state and local income taxes. You cannot deduct both. State and local income taxes. If you deduct state and local income taxes, check box a on line 5. Include on this line the state and local income taxes listed below. • State and local income taxes withheld from your salary during 2004. Your Form(s) W-2 will show these amounts. Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. • State and local income taxes paid in 2004 for a prior year, such as taxes paid with your 2003 state or local income tax return. Do not include penalties or interest. • State and local estimated tax payments made during 2004, including any part of a prior year refund that you chose to have credited to your 2004 state or local income taxes. • Mandatory contributions you made to the California, New Jersey, or New York Nonoccupational Disability Benefit Fund, Rhode Island Temporary Disability Benefit Fund, or Washington State Supplemental Workmen’s Compensation Fund. Do not reduce your deduction by any: • State or local income tax refund or credit you expect to receive for 2004, or • Refund of, or credit for, prior year state and local income taxes you actually received in 2004. Instead, see the instructions for Form 1040, line 10. State and local general sales taxes. If you elect to deduct state and local general sales taxes, you must check box b on line 5. To figure your deduction, you can use either of the following methods. 1. The actual state and local general sales taxes (including compensating use taxes) you paid plus any selective sales taxes if the tax rate was the same as the general sales tax rate. For selective sales taxes on food, clothing, medical supplies, and motor vehicles, the tax is deductible even if the tax rate was less than the general sales tax rate. For selective sales taxes on motor vehicles for which the tax rate was Page 3 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. more than the general sales tax rate, the tax is deductible only up to the amount of tax that would have been imposed at the general sales tax rate. Do not include sales taxes paid on items used in your trade or business. 2. The Optional State Sales Tax Tables, which are available in Pub. 600. If you use the Optional State Sales Tax Tables, you can add to the table amount any state and local general sales taxes you paid on motor vehicles, boats, and any other items specified in Pub. 600. The deductible amount of tax on motor vehicles cannot exceed the tax that would have been imposed at the general sales tax rate. For boats, the tax is deductible only if it was imposed at the general sales tax rate. See Pub. 600 for details. Do not include sales taxes paid on items used in your trade or business. Line 6 Real Estate Taxes Include taxes (state, local, or foreign) you paid on real estate you own that was not used for business, but only if the taxes are based on the assessed value of the property. Also, the assessment must be made uniformly on property throughout the community, and the proceeds must be used for general community or governmental purposes. Pub. 530 explains the deductions homeowners may take. Do not include the following amounts on line 6. • Itemized charges for services to specific property or persons (for example, a $20 monthly charge per house for trash collection, a $5 charge for every 1,000 gallons of water consumed, or a flat charge for mowing a lawn that had grown higher than permitted under a local ordinance). • Charges for improvements that tend to increase the value of your property (for example, an assessment to build a new sidewalk). The cost of a property improvement is added to the basis of the property. However, a charge is deductible if it is used only to maintain an existing public facility in service (for example, a charge to repair an existing sidewalk, and any interest included in that charge). If your mortgage payments include your real estate taxes, you may deduct only the amount the mortgage company actually paid to the taxing authority in 2004. If you sold your home in 2004, any real estate tax charged to the buyer should be shown on your settlement statement and in box 5 of any Form 1099-S you received. This amount is considered a refund of real estate taxes. See Refunds and rebates on this page. Any real estate taxes you paid at closing should be shown on your settlement statement. Refunds and rebates. If you received a re- fund or rebate in 2004 of real estate taxes you paid in 2004, reduce your deduction by the amount of the refund or rebate. If you received a refund or rebate in 2004 of real estate taxes you paid in an earlier year, do not reduce your deduction by this amount. Instead, you must include the refund or rebate in income on Form 1040, line 21, if you deducted the real estate taxes in the earlier year and the deduction reduced your tax. See Recoveries in Pub. 525 for details on how to figure the amount to include in income. Line 7 Personal Property Taxes Enter personal property tax you paid, but only if it is based on value alone and it is charged on a yearly basis. Example. You paid a yearly fee for the registration of your car. Part of the fee was based on the car’s value and part was based on its weight. You can deduct only the part of the fee that was based on the car’s value. Line 8 Other Taxes If you had any deductible tax not listed on line 5, 6, or 7, list the type and amount of tax. Enter only one total on line 8. Include on this line income tax you paid to a foreign country or U.S. possession. TIP You may want to take a credit for the foreign tax instead of a deduction. See the instructions for Form 1040, line 46, for property. It must provide basic living accommodations including sleeping space, toilet, and cooking facilities. Limit on home mortgage interest. If you took out any mortgages after October 13, 1987, your deduction may be limited. Any additional amounts borrowed after October 13, 1987, on a line-of-credit mortgage you had on that date are treated as a mortgage taken out after October 13, 1987. If you refinanced a mortgage you had on October 13, 1987, treat the new mortgage as taken out on or before October 13, 1987. But if you refinanced for more than the balance of the old mortgage, treat the excess as a mortgage taken out after October 13, 1987. See Pub. 936 to figure your deduction if either (1) or (2) below applies. If you had more than one home at the same time, the dollar amounts in (1) and (2) apply to the total mortgages on both homes. 1. You took out any mortgages after October 13, 1987, and used the proceeds for purposes other than to buy, build, or improve your home, and all of these mortgages totaled over $100,000 at any time during 2004. The limit is $50,000 if married filing separately. An example of this type of mortgage is a home equity loan used to pay off credit card bills, buy a car, or pay tuition. 2. You took out any mortgages after October 13, 1987, and used the proceeds to buy, build, or improve your home, and these mortgages plus any mortgages you took out on or before October 13, 1987, totaled over $1 million at any time during 2004. The limit is $500,000 if married filing separately. If the total amount of all mortgages is more than the fair market value of the home, additional limits apply. See details. Interest You Paid Pub. 936. Whether your interest expense is treated as investment interest, personal interest, or business interest depends on how and when you used the loan proceeds. See Pub. 535 for details. Line 10 In general, if you paid interest in 2004 that applies to any period after 2004, you can deduct only amounts that apply for 2004. Lines 10 and 11 Home Mortgage Interest A home mortgage is any loan that is secured by your main home or second home. It includes first and second mortgages, home equity loans, and refinanced mortgages. A home may be a house, condominium, cooperative, mobile home, boat, or similar A-3 Enter on line 10 mortgage interest and points reported to you on Form 1098. If this form shows any refund of overpaid interest, do not reduce your deduction by the refund. Instead, see the instructions for Form 1040, line 21. If you paid more interest to the recipient than is shown on Form 1098, see Pub. 936 to find out if you can deduct the additional interest. If you can, attach a statement explaining the difference and enter “See attached” to the right of line 10. If you are claiming the mortgage interest credit (see the instructions for Form 1040, line 53), subtract the amount shown on Form 8396, line 3, from the total deductible interest you paid on your home mortgage. Enter the result on line 10. Page 4 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Line 11 If you did not receive a Form 1098 from the recipient, report your deductible mortgage interest on line 11. If you bought your home from the recipient, be sure to show that recipient’s name, identifying no., and address on the dotted lines next to line 11. If the recipient is an individual, the identifying no. is his or her social security number (SSN). Otherwise, it is the employer identification number. You must also let the recipient know your SSN. If you do not show the required information about the recipient or let the recipient know your SSN, you may have to pay a $50 penalty. If you and at least one other person (other than your spouse if filing jointly) were liable for and paid interest on the mortgage, and the other person received the Form 1098, attach a statement to your return showing the name and address of that person. To the right of line 11, enter “See attached.” Line 12 Points Not Reported on Form 1098 Points are shown on your settlement statement. Points you paid only to borrow money are generally deductible over the life of the loan. See Pub. 936 to figure the amount you can deduct. Points paid for other purposes, such as for a lender’s services, are not deductible. Refinancing. Generally, you must deduct points you paid to refinance a mortgage over the life of the loan. This is true even if the new mortgage is secured by your main home. If you used part of the proceeds to improve your main home, you may be able to deduct the part of the points related to the improvement in the year paid. See Pub. 936 for details. TIP If you paid off a mortgage early, deduct any remaining points in the year you paid off the mortgage. Line 13 Investment Interest Investment interest is interest paid on money you borrowed that is allocable to property held for investment. It does not include any interest allocable to passive activities or to securities that generate taxexempt income. Complete and attach Form 4952 to figure your deduction. Exception. You do not have to file Form 4952 if all three of the following apply. 1. Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. 2. You have no other deductible investment expenses. 3. You have no disallowed investment interest expense from 2003. you paid to do volunteer work for the kinds of organizations described earlier. If you drove to and from the volunteer work, you can take 14 cents a mile or the actual cost of gas and oil. Add parking and tolls to the amount you claim under either method. But do not deduct any amounts that were repaid to you. Gifts from which you benefit. If you made Alaska Permanent Fund dividends, including those reported on Form 8814, are not investment income. For more details, see Pub. 550. Gifts to Charity You can deduct contributions or gifts you gave to organizations that are religious, charitable, educational, scientific, or literary in purpose. You can also deduct what you gave to organizations that work to prevent cruelty to children or animals. Examples of these organizations are: • Churches, mosques, synagogues, temples, etc. • Boy Scouts, Boys and Girls Clubs of America, CARE, Girl Scouts, Goodwill Industries, Red Cross, Salvation Army, United Way, etc. • Fraternal orders, if the gifts will be used for the purposes listed above. • Veterans’ and certain cultural groups. • Nonprofit schools, hospitals, and organizations whose purpose is to find a cure for, or help people who have, arthritis, asthma, birth defects, cancer, cerebral palsy, cystic fibrosis, diabetes, heart disease, hemophilia, mental illness or retardation, multiple sclerosis, muscular dystrophy, tuberculosis, etc. • Federal, state, and local governments if the gifts are solely for public purposes. To verify an organization’s charitable status, you can: • Check with the organization to which you made the donation. The organization should be able to provide you with verification of its charitable status. • See Pub. 78 for a list of most qualified organizations. You can access Pub. 78 on the IRS website at www.irs.gov under Charities and Non-Profits. • Call our Tax Exempt/Government Entities Customer Account Services at 1-877-829-5500. Assistance is available Monday through Friday from 8:00 a.m. to 6:30 p.m. EST. Contributions You Can Deduct Contributions can be in cash (keep canceled checks, receipts, or other reliable written records showing the name of the organization and the date and amount given), property, or out-of-pocket expenses A-4 a gift and received a benefit in return, such as food, entertainment, or merchandise, you can generally only deduct the amount that is more than the value of the benefit. But this rule does not apply to certain membership benefits provided in return for an annual payment of $75 or less. For details, see Pub. 526. Example. You paid $70 to a charitable organization to attend a fund-raising dinner and the value of the dinner was $40. You can deduct only $30. Gifts of $250 or more. You can deduct a gift of $250 or more only if you have a statement from the charitable organization showing the information in (1) and (2) below. In figuring whether a gift is $250 or more, do not combine separate donations. For example, if you gave your church $25 each week for a total of $1,300, treat each $25 payment as a separate gift. If you made donations through payroll deductions, treat each deduction from each paycheck as a separate gift. See Pub. 526 if you made a separate gift of $250 or more through payroll deduction. 1. The amount of any money contributed and a description (but not value) of any property donated. 2. Whether the organization did or did not give you any goods or services in return for your contribution. If you did receive any goods or services, a description and estimate of the value must be included. If you received only intangible religious benefits (such as admission to a religious ceremony), the organization must state this, but it does not have to describe or value the benefit. You must get the statement by the date you file your return or TIP the due date (including extensions) for filing your return, whichever is earlier. Do not attach the statement to your return. Instead, keep it for your records. Limit on the amount you can deduct. See Pub. 526 to figure the amount of your deduction if any of the following apply. • Your cash contributions or contributions of ordinary income property are more than 30% of the amount on Form 1040, line 37. • Your gifts of capital gain property are more than 20% of the amount on Form 1040, line 37. Page 5 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. • You gave gifts of property that increased in value or gave gifts of the use of property. Contributions You Cannot Deduct • Travel expenses (including meals and lodging) while away from home, unless there was no significant element of personal pleasure, recreation, or vacation in the travel. • Political contributions. • Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups. • Cost of raffle, bingo, or lottery tickets. But you may be able to deduct these expenses on line 27. See page A-6 for details. • Cost of tuition. But you may be able to deduct this expense on line 20 (see page A-6), or Form 1040, line 27, or take a credit for this expense (see Form 8863). • Value of your time or services. • Value of blood given to a blood bank. • The transfer of a future interest in tangible personal property (generally, until the entire interest has been transferred). • Gifts to individuals and groups that are run for personal profit. • Gifts to foreign organizations. But you may be able to deduct gifts to certain U.S. organizations that transfer funds to foreign charities and certain Canadian, Israeli, and Mexican charities. See Pub. 526 for details. • Gifts to organizations engaged in certain political activities that are of direct financial interest to your trade or business. See Internal Revenue Code section 170(f)(9). • Gifts to groups whose purpose is to lobby for changes in the laws. • Gifts to civic leagues, social and sports clubs, labor unions, and chambers of commerce. • Value of benefits received in connection with a contribution to a charitable organization. See Pub. 526 for exceptions. Line 15 Gifts by Cash or Check Enter the total contributions you made in cash or by check (including out-of-pocket expenses). Line 16 Other Than by Cash or Check Enter your contributions of property. If you gave used items, such as clothing or furniture, deduct their fair market value at the time you gave them. Fair market value is what a willing buyer would pay a willing seller when neither has to buy or sell and both are aware of the conditions of the sale. For more details on determining the value of donated property, see Pub. 561. If the amount of your deduction is more than $500, you must complete and attach Form 8283. For this purpose, the “amount of your deduction” means your deduction before applying any income limits that could result in a carryover of contributions. If your total deduction is over $5,000, you may also have to get appraisals of the values of the donated property. See Form 8283 and its instructions for details. Recordkeeping. If you gave property, you should keep a receipt or written statement from the organization you gave the property to, or a reliable written record, that shows the organization’s name and address, the date and location of the gift, and a description of the property. For each gift of property, you should also keep reliable written records that include: • How you figured the property’s value at the time you gave it. If the value was determined by an appraisal, keep a signed copy of the appraisal. • The cost or other basis of the property if you must reduce it by any ordinary income or capital gain that would have resulted if the property had been sold at its fair market value. • How you figured your deduction if you chose to reduce your deduction for gifts of capital gain property. • Any conditions attached to the gift. If your total deduction for gifts of property is over $500, you gave less than your entire interest in the property, or you made a “qualified conservation contribution,” your records should contain additional information. See Pub. 526 for details. Line 17 Carryover From Prior Year Enter any carryover of contributions that you could not deduct in an earlier year because they exceeded your adjusted gross income limit. See Pub. 526 for details. Casualty and Theft Losses Line 19 Complete and attach Form 4684 to figure the amount of your loss to enter on line 19. A-5 You may be able to deduct part or all of each loss caused by theft, vandalism, fire, storm, or similar causes, and car, boat, and other accidents. You may also be able to deduct money you had in a financial institution but lost because of the insolvency or bankruptcy of the institution. You may deduct nonbusiness casualty or theft losses only to the extent that — • The amount of each separate casualty or theft loss is more than $100, and • The total amount of all losses during the year is more than 10% of the amount on Form 1040, line 37. Special rules apply if you had both gains and losses from nonbusiness casualties or thefts. See Form 4684 and its instructions for details. Use Schedule A, line 22, to deduct the costs of proving that you had a property loss. Examples of these costs are appraisal fees and photographs used to establish the amount of your loss. For information on federal disaster area losses, see Pub. 547. Job Expenses and Most Other Miscellaneous Deductions You can deduct only the part of these expenses that exceeds 2% of the amount on Form 1040, line 37. Pub. 529 discusses the types of expenses that can and cannot be deducted. Examples of Expenses You Cannot Deduct • Political contributions. • Personal legal expenses. • Lost or misplaced cash or property. • Expenses for meals during regular or extra work hours. • The cost of entertaining friends. • Commuting expenses. See Pub. 529 for the definition of commuting. • Travel expenses for employment away from home if that period of employment exceeds 1 year. See Pub. 529 for an exception for certain federal employees. • Travel as a form of education. • Expenses of attending a seminar, convention, or similar meeting unless it is related to your employment. • Club dues. See Pub. 529 for exceptions. • Expenses of adopting a child. But you may be able to take a credit for adoption expenses. See Form 8839 for details. • Fines and penalties. • Expenses of producing tax-exempt income. Page 6 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Line 20 Unreimbursed Employee Expenses Enter the total ordinary and necessary job expenses you paid for which you were not reimbursed. (Amounts your employer included in box 1 of your Form W-2 are not considered reimbursements.) An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary. But you must fill in and attach Form 2106 if either (1) or (2) next applies. 1. You claim any travel, transportation, meal, or entertainment expenses for your job. 2. Your employer paid you for any of your job expenses reportable on line 20. If you used your own vehicle and (2) above does not apply, you may be able to file Form 2106-EZ instead. If you do not have to file Form 2106 or 2106-EZ, list the type and amount of each expense on the dotted lines next to line 20. If you need more space, attach a statement showing the type and amount of each expense. Enter one total on line 20. Do not include on line 20 any educator expenses you deducted on Form 1040, line 23. • Certain business use of part of your home. For details, including limits that apply, use TeleTax topic 509 (see page 8 of the Form 1040 instructions) or see Pub. 587. • Certain educational expenses. For details, use TeleTax topic 513 (see page 8 of the Form 1040 instructions) or see Pub. 970. Reduce your educational expenses by any tuition and fees deduction you claimed on Form 1040, line 27. TIP You may be able to take a credit for your educational expenses instead of a deduction. See Form 8863 for details. Line 21 Tax Preparation Fees Enter the fees you paid for preparation of your tax return, including fees paid for filing your return electronically. If you paid your tax by credit card, do not include the convenience fee you were charged. TIP Examples of other expenses to include on line 20 are: • Safety equipment, small tools, and supplies needed for your job. • Uniforms required by your employer that are not suitable for ordinary wear. • Protective clothing required in your work, such as hard hats, safety shoes, and glasses. • Physical examinations required by your employer. • Dues to professional organizations and chambers of commerce. • Subscriptions to professional journals. • Fees to employment agencies and other costs to look for a new job in your present occupation, even if you do not get a new job. Line 22 Other Expenses Enter the total amount you paid to produce or collect taxable income and manage or protect property held for earning income. But do not include any personal expenses. List the type and amount of each expense on the dotted lines next to line 22. If you need more space, attach a statement showing the type and amount of each expense. Enter one total on line 22. Examples of expenses to include on line 22 are: • Certain legal and accounting fees. • Clerical help and office rent. • Custodial (for example, trust account) fees. • Your share of the investment expenses of a regulated investment company. • Certain losses on nonfederally insured deposits in an insolvent or bankrupt financial institution. For details, including limits that apply, see Pub. 529. • Casualty and theft losses of property used in performing services as an employee from Form 4684, lines 32 and 38b, or Form 4797, line 18a. A-6 • Deduction for repayment of amounts under a claim of right if $3,000 or less. Other Miscellaneous Deductions Line 27 Only the expenses listed next can be deducted on this line. List the type and amount of each expense on the dotted lines next to line 27. If you need more space, attach a statement showing the type and amount of each expense. Enter one total on line 27. • Gambling losses, but only to the extent of gambling winnings reported on Form 1040, line 21. • Casualty and theft losses of income-producing property from Form 4684, lines 32 and 38b, or Form 4797, line 18a. • Federal estate tax on income in respect of a decedent. • Amortizable bond premium on bonds acquired before October 23, 1986. • Deduction for repayment of amounts under a claim of right if over $3,000. See Pub. 525 for details. • Certain unrecovered investment in a pension. • Impairment-related work expenses of a disabled person. For more details, see Pub. 529. Total Itemized Deductions Line 28 Use the worksheet on page B-1 to figure the amount to enter on line 28 if the amount on Form 1040, line 37, is over $142,700 ($71,350 if married filing separately). Page 7 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Instructions for Schedule B, Interest and Ordinary Dividends Use Schedule B (Form 1040) if any of the following apply. • You had over $1,500 of taxable interest. • Any of the Special Rules listed in the instructions for line 1 apply to you. • You are claiming the exclusion of interest from series EE or I U.S. savings bonds issued after 1989. • You had over $1,500 of ordinary dividends. • You received ordinary dividends as a nominee. • You had a foreign account or you received a distribution from, or were a grantor of, or transferor to, a foreign trust. Part III of the schedule has questions about foreign accounts and trusts. You may list more than one payer on each entry space for lines 1 and 5, but be sure to clearly show the amount paid next to the payer’s name. Add the separate amounts paid by the payers listed on an entry space and enter the total in the “Amount” column. If you still need more space, attach separate statements that are the same size as the printed schedule. Use the same format as lines 1 and 5, but show your totals on Schedule B. Be sure to put your name and social security number (SSN) on the statements and attach them at the end of your return. so. See the instructions for lines 7a and 7b on page B-2. TIP What’s New You may have to pay a penalty of up to $10,000 (more in some cases) if you are required to file Form TD F 90-22.1 (for foreign accounts and trusts), but do not do Part I. Interest Line 1 residence, list first any interest the buyer paid you on a mortgage or other form of seller financing. Be sure to show the buyer’s name, address, and SSN. You must also let the buyer know your SSN. If you do not show the buyer’s name, address, and SSN, or let the buyer know your SSN, you may have to pay a $50 penalty. Nominees Interest Report on line 1 all of your taxable interest. Interest should be shown on your Forms 1099-INT, Forms 1099-OID, or substitute statements. Include interest from series EE and I U.S. savings bonds. List each payer’s name and show the amount. Special Rules Seller-Financed Mortgages If you sold your home or other property and the buyer used the property as a personal Itemized Deductions Worksheet—Line 28 If you received a Form 1099-INT that includes interest you received as a nominee (that is, in your name, but the interest actually belongs to someone else), report the total on line 1. Do this even if you later distributed some or all of this income to others. Under your last entry on line 1, put a subtotal of all interest listed on line 1. Below this subtotal, enter “Nominee Distribution” and show the total interest you received as a nominee. Subtract this amount from the subtotal and enter the result on line 2. Keep for Your Records 1. Enter the total of the amounts from Schedule A, lines 4, 9, 14, 18, 19, 26, and 27 . . . . . . . . . . . . . 2. Enter the total of the amounts from Schedule A, lines 4, 13, and 19, plus any gambling and casualty or theft losses included on line 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 2. Be sure your total gambling and casualty or theft losses are clearly identified on the dotted lines next to line 27. 3. Is the amount on line 2 less than the amount on line 1? STOP No. Your deduction is not limited. Enter the amount from line 1 above on Schedule A, line 28. Yes. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 4. Multiply line 3 by 80% (.80) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. Enter the amount from Form 1040, line 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 6. Enter: $142,700 ($71,350 if married filing separately) . . . . . . . . . . . . . . . . . . . . 6. 7. Is the amount on line 6 less than the amount on line 5? STOP No. Your deduction is not limited. Enter the amount from line 1 above on Schedule A, line 28. Yes. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 8. Multiply line 7 by 3% (.03) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Enter the smaller of line 4 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 10. Total itemized deductions. Subtract line 9 from line 1. Enter the result here and on Schedule A, line 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. B-1 Page 8 of 8 of 2004 Instructions for Schedules A & B (Form 1040) 10:47 - 29-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. If you received interest as a nominee, you must give the acTIP tual owner a Form 1099-INT unless the owner is your spouse. You must also file a Form 1096 and a Form 1099-INT with the IRS. For more details, see the General Instructions for Forms 1099, 1098, 5498, and W-2G and the Instructions for Forms 1099-INT and 1099-OID. Accrued Interest When you buy bonds between interest payment dates and pay accrued interest to the seller, this interest is taxable to the seller. If you received a Form 1099 for interest as a purchaser of a bond with accrued interest, follow the rules earlier under Nominees to see how to report the accrued interest on Schedule B. But identify the amount to be subtracted as “Accrued Interest.” Tax-Exempt Interest If you received a Form 1099-INT for tax-exempt interest, follow the rules earlier under Nominees to see how to report the interest on Schedule B. But identify the amount to be subtracted as “Tax-Exempt Interest.” Original Issue Discount (OID) If you are reporting OID in an amount less than the amount shown on Form 1099-OID, follow the rules earlier under Nominees to see how to report the OID on Schedule B. But identify the amount to be subtracted as “OID Adjustment.” Amortizable Bond Premium If you are reducing your interest income on a bond by the amount of amortizable bond premium, follow the rules earlier under Nominees to see how to report the interest on Schedule B. But identify the amount to be subtracted as “ABP Adjustment.” Line 5 Ordinary Dividends Report on line 5 all of your ordinary dividends. This amount should be shown in box 1a of your Forms 1099-DIV or substitute statements. List each payer’s name and show the amount. Nominees If you received a Form 1099-DIV that includes ordinary dividends you received as a nominee (that is, in your name, but the ordinary dividends actually belong to someone else), report the total on line 5. Do this even if you later distributed some or all of this income to others. Under your last entry on line 5, put a subtotal of all ordinary dividends listed on line 5. Below this subtotal, enter “Nominee Distribution” and show the total ordinary dividends you received as a nominee. Subtract this amount from the subtotal and enter the result on line 6. If you received dividends as a nominee, you must give the actual owner a Form 1099-DIV unless the owner is your spouse. You must also file a Form 1096 and a Form 1099-DIV with the IRS. For more details, see the General Instructions for Forms 1099, 1098, 5498, and W-2G and the Instructions for Form 1099-DIV. TIP Excludable Interest on Series EE and I U.S. Savings Bonds Issued After 1989 If, during 2004, you cashed series EE or I U.S. savings bonds issued after 1989 and you paid qualified higher education expenses for yourself, your spouse, or your dependents, you may be able to exclude part or all of the interest on those bonds. See Form 8815 for details. Part II. Ordinary Dividends You may have to file Form 5471 if, in 2004, you were an officer or director of a foreign corporation. You may also have Exceptions. Check the “No” box if any of the following applies to you. • The combined value of the accounts was $10,000 or less during the whole year. • The accounts were with a U.S. military banking facility operated by a U.S. financial institution. • You were an officer or employee of a commercial bank that is supervised by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation; the account was in your employer’s name; and you did not have a personal financial interest in the account. • You were an officer or employee of a domestic corporation with securities listed on national securities exchanges or with assets of more than $1 million and 500 or more shareholders of record; the account was in your employer’s name; you did not have a personal financial interest in the account; and the corporation’s chief financial officer has given you written notice that the corporation has filed a current report that includes the account. See Form TD F 90-22.1 to find out if you are considered to have an interest in or signature or other authority over a financial account in a foreign country (such as a bank account, securities account, or other financial account). You can get Form TD F 90-22.1 by visiting the IRS website at www.irs.gov/pub/irs-pdf/f9022-1.pdf. If you checked the “Yes” box on line 7a, file Form TD F 90-22.1 by June 30, 2005, with the Department of the Treasury at the address shown on that form. Do not attach it to Form 1040. If you are required to file Form 90-22.1 but do not do so, you may have to pay a penalty of up to $10,000 (more in some cases). Part III. Foreign Accounts and Trusts Line 3 TIP to file Form 5471 if, in 2004, you owned 10% or more of the total (a) value of a foreign corporation’s stock, or (b) combined voting power of all classes of a foreign corporation’s stock with voting rights. For details, see Form 5471 and its instructions. Lines 7a and 7b Line 7b If you checked the “Yes” box on line 7a, enter the name of the foreign country or countries in the space provided on line 7b. Attach a separate statement if you need more space. Foreign Accounts Line 7a Line 8 Check the “Yes” box on line 7a if either (1) or (2) next applies. 1. You own more than 50% of the stock in any corporation that owns one or more foreign bank accounts. 2. At any time during the year you had an interest in or signature or other authority over a financial account in a foreign country (such as a bank account, securities account, or other financial account). Foreign Trusts TIP For line 7a, (2) does not apply to foreign securities held in a U.S. securities account. B-2 If you received a distribution from a foreign trust, you must provide additional information. For this purpose, a loan of cash or marketable securities generally is considered to be a distribution. See Form 3520 for details. If you were the grantor of, or transferor to, a foreign trust that existed during 2004, you may have to file Form 3520. PAGER/SGML Userid: ________ Fileid: I1040SC.XML Leading adjust: -8/-8/-8/0% (28-Oct-2004) ❏ Draft (Init. & date) ❏ Ok to Print Filename: D:\USERS\qjfcb\documents\Epicfiles\2004\TEST04i1040sc.xml Page 1 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule C Use Schedule C (Form 1040) to report income or loss from a business you operated or a profession you practiced as a sole proprietor. Also, use Schedule C to report wages and Profit or Loss expenses you had as a statutory employee. An activity qualifies as a business if your primary for engaging in the activity is for income or profit and you are involved in the From Business purpose activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Form 1040, line 21. Small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. See Schedule C-EZ for details. You may be subject to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more information. Section references are to the Internal Revenue Code. What’s New • The maximum amount of business expenses you can have and qualify to file Schedule C-EZ is increased from $2,500 to $5,000 for 2004. For other requirements you must meet, see Schedule C-EZ. • You can use up to four vehicles simultaneously in your business and use the standard mileage rate. For details, see the instructions for line 9 beginning on page C-3. • For certain business start-up costs paid or incurred after October 22, 2004, you can elect to deduct up to $5,000. This limit is reduced by the amount by which your start-up costs exceed $50,000. Also, the amortization period for certain business start-up costs paid or incurred after October 22, 2004, has been increased to 15 years. For details, see Pub. 535. • You can elect to deduct costs of certain qualified film and television productions that begin after October 22, 2004. For details, see Pub. 535. • You can elect to deduct certain forestation and reforestation costs paid or incurred after October 22, 2004, instead of amortizing them over 84 months. This election does not apply to estates and trusts. Also, the dollar limitation for amortization on certain forestation and reforestation costs paid or incurred after October 22, 2004, has been eliminated. For details, see Pub. 535. General Instructions Other Schedules and Forms You May Have To File • Schedule A to deduct interest, taxes, and casualty losses not related to your business. • Schedule E to report rental real estate and royalty income or (loss) that is not subject to self-employment tax. • Schedule F to report profit or (loss) from farming. • Schedule J to figure your tax by averaging your fishing income over the previous 3 years. Doing so may reduce your tax. • Schedule SE to pay self-employment tax on income from any trade or business. • Form 4562 to claim depreciation on assets placed in service in 2004, to claim amortization that began in 2004, to make an election under section 179 to expense certain property, or to report information on listed property. • Form 4684 to report a casualty or theft gain or loss involving property used in your trade or business or income-producing property. • Form 4797 to report sales, exchanges, and involuntary conversions (not from a casualty or theft) of trade or business property. • Form 8271 if you are claiming or reporting on Schedule C or C-EZ any income, deduction, loss, credit, or other tax benefit from an interest purchased or otherwise acquired in a tax shelter required to be registered with the IRS. • Form 8594 to report certain purchases or sales of groups of assets that constitute a trade or business. • Form 8824 to report like-kind exchanges. • Form 8829 to claim expenses for business use of your home. Husband-wife business. If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Do not use Schedule C or C-EZ. Instead, file Form 1065. See Pub. 541 for more details. Exception. If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. possession, you can treat the business either as a sole proprietorship or a partnership. The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A change in C-1 Cat. No. 24329W your reporting position will be treated as a conversion of the entity. Single-member limited liability company (LLC). Generally, a single-member do- mestic LLC is not treated as a separate entity for federal income tax purposes. If you are the sole member of a domestic LLC, file Schedule C or C-EZ (or Schedule E or F, if applicable). However, you can elect to treat a domestic LLC as a corporation. See Form 8832 for details on the election and the tax treatment of a foreign LLC. Heavy highway vehicle use tax. If you use certain highway trucks, truck-trailers, tractor-trailers, or buses in your trade or business, you may have to pay a federal highway motor vehicle use tax. See the Instructions for Form 2290 to find out if you owe this tax. Information returns. You may have to file information returns for wages paid to employees, certain payments of fees and other nonemployee compensation, interest, rents, royalties, real estate transactions, annuities, and pensions. You may also have to file an information return if you sold $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other similar basis for resale. For details, see the 2004 General Instructions for Forms 1099, 1098, 5498, and W-2G. If you received cash of more than $10,000 in one or more related transactions in your trade or business, you may have to file Form 8300. For details, see Pub. 1544. Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction in which you participated. Form 8886 must be filed for each tax year that your federal income tax liability is affected by your participation in the transaction. You may have to pay a penalty if you are required to file Form 8886 but do not do so. The following are reportable transactions. • Any transaction that is the same as or substantially similar to tax avoidance transactions identified by the IRS. Page 2 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. • Any transaction offered under conditions of confidentiality for which you paid an advisor a minimum fee. • Any transaction for which you have contractual protection against disallowance of the tax benefits. • Any transaction resulting in a loss of at least $2 million in any single tax year or $4 million in any combination of tax years. (At least $50,000 for a single tax year if the loss arose from a foreign currency transaction defined in section 988(c)(1), whether or not the loss flows through from an S corporation or partnership.) • Any transaction resulting in a book-tax difference of more than $10 million on a gross basis. • Any transaction resulting in a tax credit of more than $250,000, if you held the asset generating the credit for 45 days or less. See the Instructions for Form 8886 for more details and exceptions. Additional Information See Pub. 334 for more information for small businesses. Specific Instructions Filers of Form 1041. Do not complete the block labeled “Social security number (SSN).” Instead, enter your employer identification number (EIN) on line D. Line A Describe the business or professional activity that provided your principal source of income reported on line 1. If you owned more than one business, you must complete a separate Schedule C for each business. Give the general field or activity and the type of product or service. If your general field or activity is wholesale or retail trade, or services connected with production services (mining, construction, or manufacturing), also give the type of customer or client. For example, “wholesale sale of hardware to retailers” or “appraisal of real estate for lending institutions.” Line D You need an employer identification number (EIN) only if you had a qualified retirement plan or were required to file an employment, excise, estate, trust, or alcohol, tobacco, and firearms tax return. If you need an EIN, see the Instructions for Form SS-4. If you do not have an EIN, leave line D blank. Do not enter your SSN. Line E Enter your business address. Show a street address instead of a box number. Include the suite or room number, if any. If you conducted the business from your home located at the address shown on Form 1040, page 1, you do not have to complete this line. Line F Line G Generally, you can use the cash method, accrual method, or any other method permitted by the Internal Revenue Code. In all cases, the method used must clearly reflect income. Unless you are a qualifying taxpayer or a qualifying small business taxpayer, you must use the accrual method for sales and purchases of inventory items. See the Part III instructions on page C-6 for the definition of a qualifying taxpayer and a qualifying small business taxpayer. Special rules apply to long-term contracts. See section 460 for details. If your business activity was not a rental activity and you met any of the material participation tests below or the exception for oil and gas applies (explained on page C-3), check the “Yes” box. Otherwise, check the “No” box. If you check the “No” box, this business is a passive activity. If you have a loss from this business, see Limit on losses on page C-3. If you have a profit from this business activity but have current year losses from other passive activities or you have prior year unallowed passive activity losses, see the Instructions for Form 8582. Material participation. Participation, for purposes of the seven material participation tests listed below, generally includes any work you did in connection with an activity if you owned an interest in the activity at the time you did the work. The capacity in which you did the work does not matter. However, work is not treated as participation if it is work that an owner would not customarily do in the same type of activity and one of your main reasons for doing the work was to avoid the disallowance of losses or credits from the activity under the passive activity rules. Work you did as an investor in an activity is not treated as participation unless you were directly involved in the day-to-day management or operations of the activity. Work done as an investor includes: • Studying and reviewing financial statements or reports on the activity, • Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and • Monitoring the finances or operations of the activity in a nonmanagerial capacity. Participation by your spouse during the tax year in an activity you own can be counted as your participation in the activity. This applies even if your spouse did not own an interest in the activity and whether or not you and your spouse file a joint return. For purposes of the passive activity rules, you materially participated in the operation of this trade or business activity during 2004 if you met any of the following seven tests. 1. You participated in the activity for more than 500 hours during the tax year. 2. Your participation in the activity for the tax year was substantially all of the participation in the activity of all individuals (including individuals who did not own any interest in the activity) for the tax year. 3. You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other person for the tax year. This includes individuals who did not own any interest in the activity. 4. The activity is a significant participation activity for the tax year, and you participated in all significant participation activities for more than 500 hours during the year. An activity is a “significant participation activity” if it involves the conduct of a trade or business, you participated in the activity for more than 100 hours dur- If you use the cash method, show all items of taxable income actually or constructively received during the year (in cash, property, or services). Income is constructively received when it is credited to your account or set aside for you to use. Also, show amounts actually paid during the year for deductible expenses. However, if the payment of an expenditure creates an asset having a useful life that extends substantially beyond the close of the year, it may not be deductible or may be deductible only in part for the year of the payment. See Pub. 535. If you use the accrual method, report income when you earn it and deduct expenses when you incur them even if you do not pay them during the tax year. Accrual-basis taxpayers are put on a cash basis for deducting business expenses owed to a related cash-basis taxpayer. Other rules determine the timing of deductions based on economic performance. See Pub. 538. To change your accounting method, you generally must file Form 3115. You may also have to make an adjustment to prevent amounts of income or expense from being duplicated or omitted. This is called a section 481(a) adjustment. Example. You change to the cash method of accounting and choose to account for inventoriable items in the same manner as materials and supplies that are not incidental. You accrued sales in 2003 for which you received payment in 2004. You must report those sales in both years as a result of changing your accounting method and must make a section 481(a) adjustment to prevent duplication of income. A net negative section 481(a) adjustment is taken into account entirely in the year of the change. A net positive section 481(a) adjustment is generally taken into account over a period of 4 years. Include any net positive section 481(a) adjustments on line 6. If the net section 481(a) adjustment is negative, report it in Part V. For details on figuring section 481(a) adjustments, see the Instructions for Form 3115, Rev. Proc. 2004-23, 2004-16 I.R.B. 785, available at www.irs.gov/irb/ 2004-16_IRB/ar11.html, and Rev. Proc. 2004-57, 2004-38 I.R.B. 498, available at www.irs.gov/irb/2004-38_IRB/ar11.html. C-2 Page 3 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. ing the tax year, and you did not materially participate under any of the material participation tests (other than this test 4). 5. You materially participated in the activity for any 5 of the prior 10 tax years. 6. The activity is a personal service activity in which you materially participated for any 3 prior tax years. A personal service activity is an activity that involves performing personal services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. 7. Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the tax year. But you do not meet this test if you participated in the activity for 100 hours or less during the tax year. Your participation in managing the activity does not count in determining if you meet this test if any person (except you) (a) received compensation for performing management services in connection with the activity or (b) spent more hours during the tax year than you spent performing management services in connection with the activity (regardless of whether the person was compensated for the services). Rental of personal property. A rental activity (such as long-term equipment leasing) is a passive activity even if you materially participated in the activity. However, if you met any of the five exceptions listed under Rental Activities in the Instructions for Form 8582, the rental of the property is not treated as a rental activity and the material participation rules above apply. Exception for oil and gas. If you are filing Schedule C to report income and deductions from an oil or gas well in which you own a working interest directly or through an entity that does not limit your liability, check the “Yes” box. The activity of owning the working interest is not a passive activity regardless of your participation. Limit on losses. If you checked the “No” box and you have a loss from this business, you may have to use Form 8582 to figure your allowable loss, if any, to enter on Schedule C, line 31. Generally, you can deduct losses from passive activities only to the extent of income from passive activities. For details, see Pub. 925. extraterritorial income that is qualifying foreign trade income. Use Form 8873 to figure the extraterritorial income exclusion. Report it on Schedule C as explained in the Instructions for Form 8873. Line 1 Enter gross receipts from your trade or business. Include amounts you received in your trade or business that were properly shown on Forms 1099-MISC. If the total amounts that were reported in box 7 of Forms 1099-MISC are more than the total you are reporting on line 1, attach a statement explaining the difference. Statutory employees. If you received a Form W-2 and the “Statutory employee” box in box 13 of that form was checked, report your income and expenses related to that income on Schedule C or C-EZ. Enter your statutory employee income from box 1 of Form W-2 on line 1 of Schedule C or C-EZ and check the box on that line. Social security and Medicare tax should have been withheld from your earnings; therefore, you do not owe self-employment tax on these earnings. Statutory employees include full-time life insurance agents, certain agent or commission drivers and traveling salespersons, and certain homeworkers. If you had both self-employment income and statutory employee income, you must file two Schedules C. You cannot use Schedule C-EZ or combine these amounts on a single Schedule C. Installment sales. Generally, the installment method cannot be used to report income from the sale of (a) personal property regularly sold under the installment method, or (b) real property held for resale to customers. But the installment method can be used to report income from sales of certain residential lots and timeshares if you elect to pay interest on the tax due on that income after the year of sale. See section 453(l)(2)(B) for details. If you make this election, include the interest on Form 1040, line 62. Also, enter “453(l)(3)” and the amount of the interest on the dotted line to the left of line 62. If you use the installment method, attach a schedule to your return. Show separately for 2004 and the 3 preceding years: gross sales, cost of goods sold, gross profit, percentage of gross profit to gross sales, amounts collected, and gross profit on amounts collected. vehicles used in your business and clean-fuel vehicle refueling property. For details, see Pub. 535. If the business use percentage of any listed property (defined in the instructions for line 13 on page C-4) decreased to 50% or less in 2004, report on this line any recapture of excess depreciation, including any section 179 expense deduction. Use Form 4797 to figure the recapture. Also, if the business use percentage drops to 50% or less on leased listed property (other than a vehicle), include on this line any inclusion amount. See Pub. 946 to figure the amount. Part II. Expenses Capitalizing costs of property. If you produced real or tangible personal property or acquired property for resale, certain expenses attributable to the property generally must be included in inventory costs or capitalized. In addition to direct costs, producers of inventory property generally must also include part of certain indirect costs in their inventory. Purchasers of personal property acquired for resale must include part of certain indirect costs in inventory only if the average annual gross receipts for the 3 prior tax years exceed $10 million. Also, you must capitalize part of the indirect costs that benefit real or tangible personal property constructed for use in a trade or business, or noninventory property produced for sale to customers. Reduce the amounts on lines 8 through 26 and Part V by amounts capitalized. For details, see Pub. 538. Exception for certain producers. Produc- ers who account for inventoriable items in the same manner as materials and supplies that are not incidental can currently deduct expenditures for direct labor and all indirect costs that would otherwise be included in inventory costs. See Cost of Goods Sold on page C-6 for more details. Exception for creative property. If you are an artist, author, or photographer, you may be exempt from the capitalization rules. However, your personal efforts must have created (or reasonably be expected to create) the property. This exception does not apply to any expense related to printing, photographic plates, motion picture films, video tapes, or similar items. These expenses are subject to the capitalization rules. For details, see Pub. 538. Line H If you started or acquired this business in 2004, check the box on line H. Also check the box if you are reopening or restarting this business after temporarily closing it, and you did not file a 2003 Schedule C or C-EZ for this business. Part I. Income Except as otherwise provided in the Internal Revenue Code, gross income includes income from whatever source derived. Gross income, however, does not include Line 6 Line 9 Report on line 6 amounts from finance reserve income, scrap sales, bad debts you recovered, interest (such as on notes and accounts receivable), state gasoline or fuel tax refunds you got in 2004, credit for federal tax paid on gasoline or other fuels claimed on your 2003 Form 1040, prizes and awards related to your trade or business, and other kinds of miscellaneous business income. Include amounts you received in your trade or business as shown on Form 1099-PATR. Also, include any recapture of the deduction for clean-fuel You can deduct the actual expenses of running your car or truck or take the standard mileage rate. You must use actual expenses if you used your vehicle for hire (such as a taxicab) or you used more than four vehicles simultaneously in your business (such as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle. C-3 You can take the standard mileage rate for 2004 only if you: Page 4 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. • Owned the vehicle and use the standard mileage rate for the first year you placed the vehicle in service, or • Leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before 1998). If you deduct actual expenses: • Include on line 9 the business portion of expenses for gasoline, oil, repairs, insurance, tires, license plates, etc., and • Show depreciation on line 13 and rent or lease payments on line 20a. If you take the standard mileage rate, multiply the number of business miles by 37.5 cents. Add to this amount your parking fees and tolls, and enter the total on line 9. Do not deduct depreciation, rent or lease payments, or your actual operating expenses. For details, see Pub. 463. Information on your vehicle. If you claim any car and truck expenses, you must provide certain information on the use of your vehicle by completing one of the following. • Schedule C, Part IV, or Schedule C-EZ, Part III, if: (a) you are claiming the standard mileage rate, you lease your vehicle, or your vehicle is fully depreciated, and (b) you are not required to file Form 4562 for any other reason. If you used more than one vehicle during the year, attach your own schedule with the information requested in Schedule C, Part IV, or Schedule C-EZ, Part III, for each additional vehicle. • Form 4562, Part V, if you are claiming depreciation on your vehicle or you are required to file Form 4562 for any other reason (see the instructions for line 13). Line 11 Enter the total cost of contract labor for the tax year. Do not include contract labor deducted elsewhere on your return such as contract labor that you included in Part III. Also, do not include salaries and wages paid to your employees, instead see line 26. tion of income. You can also elect under section 179 to expense part of the cost of certain property you bought in 2004 for use in your business. See the Instructions for Form 4562 to figure the amount to enter on line 13. When to attach Form 4562. You must complete and attach Form 4562 only if: • You are claiming depreciation on property placed in service during 2004; • You are claiming depreciation on listed property (defined below), regardless of the date it was placed in service; or • You are claiming a section 179 expense deduction. If you acquired depreciable property for the first time in 2004, see Pub. 946. Listed property generally includes, but is not limited to: • Passenger automobiles weighing 6,000 pounds or less; • Any other property used for transportation if the nature of the property lends itself to personal use, such as motorcycles, pickup trucks, etc.; • Any property used for entertainment or recreational purposes (such as photographic, phonographic, communication, and video recording equipment); • Cellular telephones or other similar telecommunications equipment; and • Computers or peripheral equipment. Exceptions. Listed property does not include photographic, phonographic, communication, or video equipment used exclusively in your trade or business or at your regular business establishment. It also does not include any computer or peripheral equipment used exclusively at a regular business establishment and owned or leased by the person operating the establishment. For purposes of these exceptions, a portion of your home is treated as a regular business establishment only if that portion meets the requirements under section 280A(c)(1) for deducting expenses for the business use of your home. Line 12 See the instructions for line 6 on page C-3 if the business use percentage of any listed property decreased to 50% or less in 2004. Enter your deduction for depletion on this line. If you have timber depletion, attach Form T. See Pub. 535 for details. Line 14 Line 13 Depreciation and section 179 expense deduction. Depreciation is the annual de- duction allowed to recover the cost or other basis of business or investment property having a useful life substantially beyond the tax year. You can also depreciate improvements made to leased business property. However, stock in trade, inventories, and land are not depreciable. Depreciation starts when you first use the property in your business or for the production of income. It ends when you take the property out of service, deduct all your depreciable cost or other basis, or no longer use the property in your business or for the produc- Deduct contributions to employee benefit programs that are not an incidental part of a pension or profit-sharing plan included on line 19. Examples are accident and health plans, group-term life insurance, and dependent care assistance programs. If you made contributions on your behalf as a self-employed person to a dependent care assistance program, complete Form 2441, Parts I and III, to figure your deductible contributions to that program. Do not include on line 14 any contributions you made on your behalf as a self-employed person to an accident and health plan or for group-term life insurance. You may be able to deduct on Form 1040, line 31, the amount you paid for health insurance on behalf of yourself, your spouse, C-4 and dependents, even if you do not itemize your deductions. See the instructions for Form 1040, line 31, for details. Line 15 Deduct premiums paid for business insurance on line 15. Deduct on line 14 amounts paid for employee accident and health insurance. Do not deduct amounts credited to a reserve for self-insurance or premiums paid for a policy that pays for your lost earnings due to sickness or disability. For details, see Pub. 535. Lines 16a and 16b Interest allocation rules. The tax treatment of interest expense differs depending on its type. For example, home mortgage interest and investment interest are treated differently. “Interest allocation” rules require you to allocate (classify) your interest expense so it is deducted (or capitalized) on the correct line of your return and receives the right tax treatment. These rules could affect how much interest you are allowed to deduct on Schedule C or C-EZ. Generally, you allocate interest expense by tracing how the proceeds of the loan were used. See Pub. 535 for details. If you paid interest on a debt secured by your main home and any of the proceeds from that debt were used in connection with your trade or business, see Pub. 535 to figure the amount that is deductible on Schedule C or C-EZ. How to report. If you have a mortgage on real property used in your business (other than your main home), enter on line 16a the interest you paid for 2004 to banks or other financial institutions for which you received a Form 1098 (or similar statement). If you did not receive a Form 1098, enter the interest on line 16b. If you paid more mortgage interest than is shown on Form 1098, see Pub. 535 to find out if you can deduct the additional interest. If you can, include the amount on line 16a. Attach a statement to your return explaining the difference and enter “See attached” in the margin next to line 16a. If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage and the other person received the Form 1098, include your share of the interest on line 16b. Attach a statement to your return showing the name and address of the person who received the Form 1098. In the margin next to line 16b, enter “See attached.” If you paid interest in 2004 that applies to future years, deduct only the part that applies to 2004. Line 17 Include on this line fees for tax advice related to your business and for preparation of the tax forms related to your business. Page 5 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Line 19 Enter your deduction for contributions to a pension, profit-sharing, or annuity plan, or plans for the benefit of your employees. If the plan included you as a self-employed person, enter contributions made as an employer on your behalf on Form 1040, line 32, not on Schedule C. Generally, you must file the applicable form listed below if you maintain a pension, profit-sharing, or other funded-deferred compensation plan. The filing requirement is not affected by whether or not the plan qualified under the Internal Revenue Code, or whether or not you claim a deduction for the current tax year. There is a penalty for failure to timely file these forms. Form 5500. File this form for a plan that is not a one-participant plan (see below). File this form for a one-participant plan. A one-participant plan is a plan that only covers you (or you and your spouse). Form 5500-EZ. For details, see Pub. 560. Lines 20a and 20b If you rented or leased vehicles, machinery, or equipment, enter on line 20a the business portion of your rental cost. But if you leased a vehicle for a term of 30 days or more, you may have to reduce your deduction by an amount called the inclusion amount. See Pub. 463 to figure your inclusion amount. Enter on line 20b amounts paid to rent or lease other property, such as office space in a building. Line 21 Deduct the cost of repairs and maintenance. Include labor, supplies, and other items that do not add to the value or increase the life of the property. Do not deduct the value of your own labor. Do not deduct amounts spent to restore or replace property; they must be capitalized. Line 22 Generally, you can deduct the cost of supplies only to the extent you actually consumed and used them in your business during the tax year (unless you deducted them in a prior tax year). However, if you had incidental supplies on hand for which you kept no inventories or records of use, you can deduct the cost of supplies you actually purchased during the tax year, provided that method clearly reflects income. Line 23 You can deduct the following taxes and licenses on this line. • State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you must also include the amount collected in gross receipts or sales on line 1. • Real estate and personal property taxes on business assets. • Licenses and regulatory fees for your trade or business paid each year to state or local governments. But some licenses, such as liquor licenses, may have to be amortized. See Pub. 535 for details. • Social security and Medicare taxes paid to match required withholding from your employees’ wages. Also, federal unemployment tax paid. Reduce your deduction by the amount shown on Form 8846, line 4. • Federal highway use tax. Do not deduct the following on this line. • Federal income taxes, including your self-employment tax. However, you can deduct one-half of your self-employment tax on Form 1040, line 30. • Estate and gift taxes. • Taxes assessed to pay for improvements, such as paving and sewers. • Taxes on your home or personal use property. • State and local sales taxes on property purchased for use in your business. Instead, treat these taxes as part of the cost of the property. • State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments. These taxes are not included in gross receipts or sales nor are they a deductible expense. However, if the state or local government allowed you to retain any part of the sales tax you collected, you must include that amount as income on line 6. • Other taxes and license fees not related to your business. Line 24a Enter your expenses for lodging and transportation connected with overnight travel for business while away from your tax home. Generally, your tax home is your main place of business regardless of where you maintain your family home. You cannot deduct expenses paid or incurred in connection with employment away from home if that period of employment exceeds 1 year. Also, you cannot deduct travel expenses for your spouse, your dependent, or any other individual unless that person is your employee, the travel is for a bona fide business purpose, and the expenses would otherwise be deductible by that person. Do not include expenses for meals and entertainment on this line. Instead, see the instructions for lines 24b and 24c on this page. Instead of keeping records of your actual incidental expenses, you can use an optional method for deducting incidental expenses only if you did not pay or incur meal expenses on a day you were traveling away from your tax home. The amount of the deduction is $3 a day. Incidental expenses include fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign C-5 countries. They do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, or the costs of telegrams or telephone calls. You cannot use this method on any day that you use the standard meal allowance (as explained in the instructions for lines 24b and 24c). You cannot deduct expenses for attending a foreign convention unless it is directly related to your trade or business and it is as reasonable for the meeting to be held outside the North American area as within it. These rules apply to both employers and employees. Other rules apply to luxury water travel. For details, see Pub. 463. Lines 24b and 24c On line 24b, enter your total business meal and entertainment expenses. Include meal expenses while traveling away from home for business. Instead of the actual cost of your meals while traveling away from home, you can use the standard meal allowance for your daily meals and incidental expenses. Under this method, you deduct a specified amount, depending on where you travel, instead of keeping records of your actual meal expenses. However, you must still keep records to prove the time, place, and business purpose of your travel. The standard meal allowance is the federal M&IE rate. You can find these rates on the Internet at www.policyworks.gov/ perdiem. For locations outside the continental United States, the applicable rates are published monthly. You can find these rates on the Internet at www.state.gov. See Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel. Business meal expenses are deductible only if they are (a) directly related to or associated with the active conduct of your trade or business, (b) not lavish or extravagant, and (c) incurred while you or your employee is present at the meal. You cannot deduct any expense paid or incurred for a facility (such as a yacht or hunting lodge) used for any activity usually considered entertainment, amusement, or recreation. Also, you cannot deduct membership dues for any club organized for business, pleasure, recreation, or other social purpose. This includes country clubs, golf and athletic clubs, airline and hotel clubs, and clubs operated to provide meals under conditions favorable to business discussion. But it does not include civic or public service organizations, professional organizations (such as bar and medical associations), business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards, unless a principal purpose of the organization is to entertain, or provide entertainment facilities for, members or their guests. There are exceptions to these rules as well as other rules that apply to sky-box rentals and tickets to entertainment events. See Pub. 463. Page 6 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Generally, you can deduct only 50% of your business meal and entertainment expenses, including meals incurred while away from home on business. For individuals subject to the Department of Transportation (DOT) hours of service limits, that percentage is increased to 70% for business meals consumed during, or incident to, any period of duty for which those limits are in effect. Individuals subject to the DOT hours of service limits include the following persons: • Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. • Interstate truck operators who are under DOT regulations. • Certain merchant mariners who are under Coast Guard regulations. However, you can fully deduct meals, incidentals, and entertainment furnished or reimbursed to an employee if you properly treat the expense as wages subject to withholding. You can also fully deduct meals, incidentals, and entertainment provided to a nonemployee to the extent the expenses are includible in the gross income of that person and reported on Form 1099-MISC. See Pub. 535 for details and other exceptions. If you provide daycare in your home, see Pub. 587 for information on deducting the cost of meals and snacks you provide to your daycare recipients. Figure how much of the amount on line 24b is not deductible and enter that amount on line 24c. Line 25 Deduct only utility expenses for your trade or business. Local telephone service. If you used your home phone for business, do not deduct the base rate (including taxes) of the first phone line into your residence. But you can deduct expenses for any additional costs you incurred for business that are more than the cost of the base rate for the first phone line. For example, if you had a second line, you can deduct the business percentage of the charges for that line, including the base rate charges. Line 26 Enter the total salaries and wages for the tax year. Do not include salaries and wages deducted elsewhere on your return or amounts paid to yourself. Reduce your deduction by the amounts claimed on: • Form 5884, Work Opportunity Credit, line 2; • Form 8844, Empowerment Zone and Renewal Community Employment Credit, line 2; • Form 8845, Indian Employment Credit, line 4; • Form 8861, Welfare-to-Work Credit, line 2; and • Form 8884, New York Liberty Zone Business Employee Credit, line 2. If you provided taxable fringe benefits to your employees, such as personal use of a car, do not deduct as wages the amount applicable to depreciation and other expenses claimed elsewhere. Line 30 Business use of your home. You may be able to deduct certain expenses for business use of your home, subject to limitations. You must attach Form 8829 if you claim this deduction. For details, see the Instructions for Form 8829 and Pub. 587. Line 31 If you have a loss, the amount of loss you can deduct this year may be limited. Go to line 32 before entering your loss on line 31. If you answered “No” to Schedule C, Question G, also see the Instructions for Form 8582. Enter the net profit or deductible loss here. Combine this amount with any profit or loss from other businesses, and enter the total on Form 1040, line 12, and Schedule SE, line 2. Estates and trusts should enter the total on Form 1041, line 3. If you have a net profit on line 31, this amount is earned income and may qualify you for the earned income credit. See the instructions for Form 1040, lines 65a and 65b, for details. Statutory employees. Include your net profit or deductible loss from line 31 with other Schedule C amounts on Form 1040, line 12. However, do not report this amount on Schedule SE, line 2. If you are required to file Schedule SE because of other self-employment income, see the Instructions for Schedule SE. Line 32 At-risk rules. Generally, if you have (a) a business loss and (b) amounts in the business for which you are not at risk, you will have to complete Form 6198 to figure your allowable loss. The at-risk rules generally limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the business. Check box 32b if you have amounts for which you are not at risk in this business, such as the following. • Nonrecourse loans used to finance the business, to acquire property used in the business, or to acquire the business that are not secured by your own property (other than property used in the business). However, there is an exception for certain nonrecourse financing borrowed by you in connection with holding real property. • Cash, property, or borrowed amounts used in the business (or contributed to the business, or used to acquire the business) that are protected against loss by a guarantee, stop-loss agreement, or other similar C-6 arrangement (excluding casualty insurance and insurance against tort liability). • Amounts borrowed for use in the business from a person who has an interest in the business, other than as a creditor, or who is related under section 465(b)(3) to a person (other than you) having such an interest. If all amounts are at risk in this business, check box 32a and enter your loss on line 31. But if you answered “No” to Question G, you may need to complete Form 8582 to figure your deductible loss. See the Instructions for Form 8582 for details. If you checked box 32b, see Form 6198 to determine the amount of your deductible loss. But if you answered “No” to Question G, your loss may be further limited. See the Instructions for Form 8582. If your at-risk amount is zero or less, enter -0- on line 31. Be sure to attach Form 6198 to your return. If you checked box 32b and you do not attach Form 6198, the processing of your tax return may be delayed. Any loss from this business not allowed for 2004 because of the at-risk rules is treated as a deduction allocable to the business in 2005. For details, see the Instructions for Form 6198 and Pub. 925. Part III. Cost of Goods Sold Generally, if you engaged in a trade or business in which the production, purchase, or sale of merchandise was an income-producing factor, you must take inventories into account at the beginning and end of your tax year. However, if you are a qualifying taxpayer or a qualifying small business taxpayer, you can account for inventoriable items in the same manner as materials and supplies that are not incidental. To change your accounting method, see the instructions for line F on page C-2. A qualifying taxpayer is a taxpayer (a) whose average annual gross receipts for the 3 prior tax years are $1 million or less, and (b) whose business is not a tax shelter (as defined in section 448(d)(3)). A qualifying small business taxpayer is a taxpayer (a) whose average annual gross receipts for the 3 prior tax years are more than $1 million but not more than $10 million, (b) whose business is not a tax shelter (as defined in section 448(d)(3)), and (c) whose principal business activity is not an ineligible activity as explained in Rev. Proc. 2002-28. You can find Rev. Proc. 2002-28 on page 815 of Internal Revenue Bulletin 2002-18 at www.irs.gov/pub/ irs-irbs/irb02-18.pdf. Under this accounting method, inventory costs for raw materials purchased for use in producing finished goods and merchandise purchased for resale are deductible in the year the finished goods or merchandise are sold (but not before the year you paid for the raw materials or merchandise, if you are also using the cash method). Enter amounts paid for all raw materials and merchandise during 2004 on Page 7 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. line 36. The amount you can deduct for 2004 is figured on line 42. Additional information. For additional guidance on this method of accounting for inventoriable items, see Rev. Proc. 2001-10 if you are a qualifying taxpayer or Rev. Proc. 2002-28 if you are a qualifying small business taxpayer. You can find Rev. Proc. 2001-10 on page 272 of Internal Revenue Bulletin 2001-2 at www.irs.gov/pub/ irs-irbs/irb01-02.pdf , and Rev. Proc. 2002-28 on page 815 of Internal Revenue Bulletin 2002-18 at www.irs.gov/pub/ irs-irbs/irb02-18.pdf. Certain direct and indirect expenses may have to be capitalized or included in inventory. See the instructions for Part II beginning on page C-3. Line 33 Your inventories can be valued at cost; cost or market value, whichever is lower; or any other method approved by the IRS. However, you are required to use cost if you are using the cash method of accounting. Line 35 If you are changing your method of accounting beginning with 2004, refigure last year’s closing inventory using your new method of accounting and enter the result on line 35. If there is a difference between last year’s closing inventory and the refigured amount, attach an explanation and take it into account when figuring your section 481(a) adjustment. See the example on page C-2 for details. Line 41 If you account for inventoriable items in the same manner as materials and supplies that are not incidental, enter on line 41 the portion of your raw materials and merchandise purchased for resale that are included on line 40 and were not sold during the year. Part V. Other Expenses Include all ordinary and necessary business expenses not deducted elsewhere on Schedule C. List the type and amount of each expense separately in the space provided. Enter the total on lines 48 and 27. Do not include the cost of business equipment or furniture, replacements or permanent improvements to property, or personal, living, and family expenses. Do not include charitable contributions. Also, you cannot deduct fines or penalties paid to a government for violating any law. For details on business expenses, see Pub. 535. Amortization. Include amortization in this part. For amortization that begins in 2004, you must complete and attach Form 4562. You can amortize: • The cost of pollution-control facilities. • Amounts paid for research and experimentation. • Qualified revitalization expenditures. • Amounts paid to acquire, protect, expand, register, or defend trademarks or trade names. • Goodwill and certain other intangibles. In general, you cannot amortize real property construction period interest and taxes. Special rules apply for allocating interest to real or personal property produced in your trade or business. At-risk loss deduction. Any loss from this activity that was not allowed as a deduction last year because of the at-risk rules is treated as a deduction allocable to this activity in 2004. Business start-up costs. You can elect to amortize certain business start-up costs paid or incurred before October 23, 2004, over 60 months or more, beginning with the month your business began. For certain business start-up costs paid or incurred after October 22, 2004, you can elect to deduct up to $5,000 for the year your business began. This limit is reduced by the amount by which your start-up costs exceed $50,000. You can elect to amortize any remaining business start-up costs over 15 years. For details, see Pub. 535. For amortization that begins in 2004, you must complete and attach Form 4562. Capital construction fund. Do not claim on Schedule C or C-EZ the deduction for amounts contributed to a capital construction fund set up under the Merchant Marine Act of 1936. Instead, reduce the amount you would otherwise enter on Form 1040, line 42, by the amount of the deduction. Next to line 42, enter “CCF” and the amount of the deduction. For details, see Pub. 595. Clean-fuel vehicles and clean-fuel vehicle refueling property. You may be able to de- duct part of the cost of qualified clean-fuel vehicle property used in your business and qualified clean-fuel vehicle refueling property. See Pub. 535 for details. Disabled access credit and the deduction for removing barriers to individuals with disabilities and the elderly. You may be able to claim a tax credit of up to $5,000 for eligible expenditures paid or incurred in 2004 to provide access to your business for individuals with disabilities. See Form 8826 for details. You can also deduct up to $15,000 of costs paid or incurred in 2004 to remove architectural or transportation barriers to individuals with disabilities and the elderly. However, you cannot take both the credit and the deduction on the same expenditures. Film and television production expenses. You can elect to deduct costs of certain qualified film and television productions that begin after October 22, 2004. For details, see Pub. 535. Forestation and reforestation costs. You can elect to amortize certain forestation and reforestation costs over 84 months. You can also elect to expense up to $10,000 ($5,000 if married filing separately) of certain forestation and reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. The amortization election does not apply to trusts and the expense election does not apply to estates and trusts. For details, see Pub. 535. For amortization that begins in 2004, you must complete and attach Form 4562. Principal Business or Professional Activity Codes These codes for the Principal Business or Professional Activity classify sole proprietorships by the type of activity they are engaged in to facilitate the administration of the Internal Revenue Code. These six-digit codes are based on the North American Industry Classification System (NAICS). Select the category that best describes your primary business activity (for example, Real Estate). Then select the activity that best identifies the principal source of your sales or receipts (for example, real estate agent). Now find the six-digit code assigned to this activity (for example, 531210, the code for offices Accommodation, Food Services, & Drinking Places Accommodation 722300 721310 721210 Administrative & Support and Waste Management & Remediation Services Administrative & Support Services 721100 Rooming & boarding houses RV (recreational vehicle) parks & recreational camps Travel accommodation (including hotels, motels, & bed & breakfast inns) Food Services & Drinking Places 561430 722410 561740 722110 722210 Drinking places (alcoholic beverages) Full-service restaurants Limited-service eating places 561440 561450 Special food services (including food service contractors & caterers) Business service centers (including private mail centers & copy shops) Carpet & upholstery cleaning services Collection agencies Credit bureaus 561410 561300 561710 561210 561600 561720 561730 561110 561420 C-7 of real estate agents and brokers) and enter it on Schedule C or C-EZ, line B. Note. If your principal source of income is from farming activities, you should file Schedule F. Document preparation services Employment services Exterminating & pest control services Facilities support (management) services Investigation & security services Janitorial services Landscaping services Office administrative services Telephone call centers (including telephone answering services & telemarketing bureaus) 561500 Travel arrangement & reservation services 561490 Other business support services (including repossession services, court reporting, & stenotype services) 561790 Other services to buildings & dwellings 561900 Other support services (including packaging & labeling services, & convention & trade show organizers) Page 8 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Principal Business or Professional Activity Codes (continued) Waste Management & Remediation Services 562000 Waste management & remediation services Agriculture, Forestry, Hunting, & Fishing 112900 114110 113000 114210 Animal production (including breeding of cats and dogs) Fishing Forestry & logging (including forest nurseries & timber tracts) Hunting & trapping Support Activities for Agriculture & Forestry 115210 115110 115310 Support activities for animal production (including farriers) Support activities for crop production (including cotton ginning, soil preparation, planting, & cultivating) Support activities for forestry 238910 238120 238340 238290 238390 238190 238990 Educational Services 611000 Educational services (including schools, colleges, & universities) 522100 522200 713100 713200 713900 522300 712100 Securities, Commodity Contracts, & Other Financial Investments & Related Activities Museums, historical sites, & similar institutions Performing Arts, Spectator Sports, & Related Industries 711410 711510 711100 711300 711210 Agents & managers for artists, athletes, entertainers, & other public figures Independent artists, writers, & performers Performing arts companies Promoters of performing arts, sports, & similar events Spectator sports (including professional sports clubs & racetrack operations) Construction of Buildings 236200 236100 Nonresidential building construction Residential building construction Heavy and Civil Engineering Construction 237310 237210 237100 237990 Highway, street, & bridge construction Land subdivision Utility system construction Other heavy & civil engineering construction Specialty Trade Contractors 238310 238210 238350 238330 238130 238150 238140 238320 238220 238110 238160 238170 Drywall & insulation contractors Electrical contractors Finish carpentry contractors Flooring contractors Framing carpentry contractors Glass & glazing contractors Masonry contractors Painting & wall covering contractors Plumbing, heating & airconditioning contractors Poured concrete foundation & structure contractors Roofing contractors Siding contractors 523140 523130 523110 523210 523120 523900 624410 624200 624100 624310 Child day care services Community food & housing, & emergency & other relief services Individual & family services Vocational rehabilitation services Publishing industries (except Internet) 515000 517000 Broadcasting (except Internet) Telecommunications Internet Publishing & Broadcasting 516110 Internet publishing & broadcasting Food Manufacturing 311110 311800 311500 311400 311200 311610 311710 311300 311900 Animal food mfg. Bakeries & tortilla mfg. Dairy product mfg. Fruit & vegetable preserving & speciality food mfg. Grain & oilseed milling Animal slaughtering & processing Seafood product preparation & packaging Sugar & confectionery product mfg. Other food mfg. (including coffee, tea, flavorings, & seasonings) Leather & Allied Product Manufacturing 316210 316110 316990 Footwear mfg. (including leather, rubber, & plastics) Leather & hide tanning & finishing Other leather & allied product mfg. 518210 327300 512200 Data processing, hosting, & related services Internet service providers Web search portals Other information services (including news syndicates and libraries) Motion picture & video industries (except video rental) Sound recording industries Manufacturing Home health care services Medical & diagnostic laboratories 621310 Offices of chiropractors 621210 Offices of dentists 621330 Offices of mental health practitioners (except physicians) 621320 Offices of optometrists 621340 Offices of physical, occupational & speech therapists, & audiologists 621111 Offices of physicians (except mental health specialists) 621112 Offices of physicians, mental health specialists 621391 Offices of podiatrists 621399 Offices of all other miscellaneous health practitioners 621400 Outpatient care centers 621900 Other ambulatory health care services (including ambulance services, blood, & organ banks) Soap, cleaning compound, & toilet preparation mfg. 325900 Other chemical product & preparation mfg. Nonmetallic Mineral Product Manufacturing 512100 Commodity contracts brokers Commodity contracts dealers Investment bankers & securities dealers Securities & commodity exchanges Securities brokers Other financial investment activities (including investment advice) 325600 Internet Service Providers, Web Search Portals, & Data Processing Services Motion Picture & Sound Recording Health Care & Social Assistance Ambulatory Health Care Services 621610 621510 Nursing & residential care facilities Social Assistance 518111 518112 519100 Insurance agencies & brokerages Other insurance related activities 524290 623000 Broadcasting (except Internet) & Telecommunications Depository credit intermediation (including commercial banking, savings institutions, & credit unions) Nondepository credit intermediation (including sales financing & consumer lending) Activities related to credit intermediation (including loan brokers) Museums, Historical Sites, & Similar Institutions Hospitals Nursing & Residential Care Facilities 511000 Insurance Agents, Brokers, & Related Activities 524210 Hospitals 622000 Information Finance & Insurance Credit Intermediation & Related Activities Arts, Entertainment, & Recreation Amusement, Gambling, & Recreation Industries Amusement parks & arcades Gambling industries Other amusement & recreation services (including golf courses, skiing facilities, marinas, fitness centers, bowling centers, skating rinks, miniature golf courses) Site preparation contractors Structural steel & precast concrete construction contractors Tile & terrazzo contractors Other building equipment contractors Other building finishing contractors Other foundation, structure, & building exterior contractors All other specialty trade contractors 315000 Apparel mfg. 312000 Beverage & tobacco product mfg. 334000 Computer & electronic product mfg. 335000 Electrical equipment, appliance, & component mfg. 332000 Fabricated metal product mfg. 337000 Furniture & related product mfg. 333000 Machinery mfg. 339110 Medical equipment & supplies mfg. 322000 Paper mfg. 324100 Petroleum & coal products mfg. 326000 Plastics & rubber products mfg. 331000 Primary metal mfg. 323100 Printing & related support activities 313000 Textile mills 314000 Textile product mills 336000 Transportation equipment mfg. 321000 Wood product mfg. 339900 Other miscellaneous mfg. Cement & concrete product mfg. 327100 Clay product & refractory mfg. 327210 Glass & glass product mfg. 327400 Lime & gypsum product mfg. 327900 Other nonmetallic mineral product mfg. Mining 212110 212200 212300 211110 213110 Other Services Personal & Laundry Services 812111 812112 812220 812310 812320 812210 812330 812113 812930 812910 812920 812190 812990 811120 325100 325500 811110 325300 325410 325200 C-8 Barber shops Beauty salons Cemeteries & crematories Coin-operated laundries & drycleaners Drycleaning & laundry services (except coin-operated) (including laundry & drycleaning dropoff & pickup sites) Funeral homes & funeral services Linen & uniform supply Nail salons Parking lots & garages Pet care (except veterinary) services Photofinishing Other personal care services (including diet & weight reducing centers) All other personal services Repair & Maintenance Chemical Manufacturing Basic chemical mfg. Paint, coating, & adhesive mfg. Pesticide, fertilizer, & other agricultural chemical mfg. Pharmaceutical & medicine mfg. Resin, synthetic rubber, & artificial & synthetic fibers & filaments mfg. Coal mining Metal ore mining Nonmetallic mineral mining & quarrying Oil & gas extraction Support activities for mining 811190 Automotive body, paint, interior, & glass repair Automotive mechanical & electrical repair & maintenance Other automotive repair & maintenance (including oil change & lubrication shops & car washes) Page 9 of 9 of 2004 Instructions for Schedule C 16:57 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Principal Business or Professional Activity Codes (continued) 811310 811210 811430 811410 811420 811490 Commercial & industrial machinery & equipment (except automotive & electronic) repair & maintenance Electronic & precision equipment repair & maintenance Footwear & leather goods repair Home & garden equipment & appliance repair & maintenance Reupholstery & furniture repair Other personal & household goods repair & maintenance Professional, Scientific, & Technical Services 541100 541211 541214 541213 541219 Legal services Offices of certified public accountants Payroll services Tax preparation services Other accounting services Architectural, Engineering, & Related Services 541310 541350 541340 541330 541360 541320 541370 541380 Architectural services Building inspection services Drafting services Engineering services Geophysical surveying & mapping services Landscape architecture services Surveying & mapping (except geophysical) services Testing laboratories Computer Systems Design & Related Services 541510 Computer systems design & related services Specialized Design Services 541400 Specialized design services (including interior, industrial, graphic, & fashion design) Other Professional, Scientific, & Technical Services 541800 541600 541910 541920 541700 541930 541940 541990 Advertising & related services Management, scientific, & technical consulting services Market research & public opinion polling Photographic services Scientific research & development services Translation & interpretation services Veterinary services All other professional, scientific, & technical services 446190 Rental & Leasing Services 532100 532400 532210 532220 532310 532230 532290 Automotive equipment rental & leasing Commercial & industrial machinery & equipment rental & leasing Consumer electronics & appliances rental Formal wear & costume rental General rental centers Video tape & disc rental Other consumer goods rental Motor Vehicle & Parts Dealers 441300 441222 441221 441110 441210 441120 441229 Religious, Grantmaking, Civic, Professional, & Similar Organizations 813000 Religious, grantmaking, civic, professional, & similar organizations Retail Trade Building Material & Garden Equipment & Supplies Dealers 444130 444110 444200 444120 444190 Hardware stores Home centers Lawn & garden equipment & supplies stores Paint & wallpaper stores Other building materials dealers 451211 451120 451140 451212 451220 451130 451110 448130 453210 Children’s & infants’ clothing stores Clothing accessories stores Family clothing stores Jewelry stores Luggage & leather goods stores Men’s clothing stores Shoe stores Women’s clothing stores Other clothing stores Electronic & Appliance Stores 443130 443120 443111 443112 Camera & photographic supplies stores Computer & software stores Household appliance stores Radio, television, & other electronics stores 453910 453310 453990 445210 445290 Beer, wine, & liquor stores Fish & seafood markets Fruit & vegetable markets Grocery stores (including supermarkets & convenience stores without gas) Meat markets Other specialty food stores 454112 454111 454310 454113 454210 454390 481000 485510 484110 484120 485210 Real Estate & Rental & Leasing Real Estate 442110 442200 486000 482110 487000 531100 447100 531210 531320 531310 531390 Furniture stores Home furnishings stores Gasoline Stations Gasoline stations (including convenience stores with gas) 485410 General Merchandise Stores 452000 484200 General merchandise stores Health & Personal Care Stores 446120 446130 446110 Electronic auctions Electronic shopping Fuel dealers Mail-order houses Vending machine operators Other direct selling establishments (including door-to-door retailing, frozen food plan providers, party plan merchandisers, & coffee-break service providers) Transportation & Warehousing Furniture & Home Furnishing Stores Lessors of real estate (including miniwarehouses & self-storage units) Offices of real estate agents & brokers Offices of real estate appraisers Real estate property managers Other activities related to real estate Art dealers Florists Gift, novelty, & souvenir stores Manufactured (mobile) home dealers Office supplies & stationery stores Pet & pet supplies stores Used merchandise stores All other miscellaneous store retailers (including tobacco, candle, & trophy shops) Nonstore Retailers Food & Beverage Stores 445310 445220 445230 445100 Book stores Hobby, toy, & game stores Musical instrument & supplies stores News dealers & newsstands Prerecorded tape, compact disc, & record stores Sewing, needlework, & piece goods stores Sporting goods stores Miscellaneous Store Retailers 453920 453110 453220 453930 448110 448210 448120 448190 Automotive parts, accessories, & tire stores Boat dealers Motorcycle dealers New car dealers Recreational vehicle dealers (including motor home & travel trailer dealers) Used car dealers All other motor vehicle dealers Sporting Goods, Hobby, Book, & Music Stores Clothing & Accessories Stores 448150 448140 448310 448320 Other health & personal care stores Cosmetics, beauty supplies, & perfume stores Optical goods stores Pharmacies & drug stores 485300 485110 483000 485990 C-9 Air transportation Charter bus industry General freight trucking, local General freight trucking, long distance Interurban & rural bus transportation Pipeline transportation Rail transportation Scenic & sightseeing transportation School & employee bus transportation Specialized freight trucking (including household moving vans) Taxi & limousine service Urban transit systems Water transportation Other transit & ground passenger transportation 488000 Support activities for transportation (including motor vehicle towing) Couriers & Messengers 492000 Couriers & messengers Warehousing & Storage Facilities 493100 Warehousing & storage (except leases of miniwarehouses & self-storage units) Utilities 221000 Utilities Wholesale Trade Merchant Wholesalers, Durable Goods 423600 423200 423700 423940 423300 423800 423500 423100 423400 423930 423910 423920 423990 Electrical & electronic goods Furniture & home furnishing Hardware, & plumbing & heating equipment & supplies Jewelry, watch, precious stone, & precious metals Lumber & other construction materials Machinery, equipment, & supplies Metal & mineral (except petroleum) Motor vehicle & motor vehicle parts & supplies Professional & commercial equipment & supplies Recyclable materials Sporting & recreational goods & supplies Toy & hobby goods & supplies Other miscellaneous durable goods Merchant Wholesalers, Nondurable Goods 424300 Apparel, piece goods, & notions 424800 Beer, wine, & distilled alcoholic beverage 424920 Books, periodicals, & newspapers 424600 Chemical & allied products 424210 Drugs & druggists’ sundries 424500 Farm product raw materials 424910 Farm supplies 424930 Flower, nursery stock, & florists’ supplies 424400 Grocery & related products 424950 Paint, varnish, & supplies 424100 Paper & paper products 424700 Petroleum & petroleum products 424940 Tobacco & tobacco products 424990 Other miscellaneous nondurable goods Wholesale Electronic Markets and Agents & Brokers 425110 425120 999999 Business to business electronic markets Wholesale trade agents & brokers Unclassified establishments (unable to classify) PAGER/SGML Userid: ________ Fileid: I1040SD.XML Leading adjust: -6/-6/0% (28-Oct-2004) ❏ Draft (Init. & date) ❏ Ok to Print D:\USERS\jmarre00\documents\Epicfiles\2004 Filename: Products\04i1040_SchD.xml Page 1 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule D Use Schedule D (Form 1040) to report the following. • The sale or exchange of a capital asset (defined on this page) not reported on another Capital Gains form or schedule. • Gains from involuntary conversions (other than from casualty or theft) of capital assets and Losses not held for business or profit. • Capital gain distributions not reported directly on Form 1040, line 13. • Nonbusiness bad debts. Additional information. See Pub. 544 and Pub. 550 for more details. For a comprehensive filled-in example of Schedule D, see Pub. 550. Section references are to the Internal Revenue Code unless otherwise noted. General Instructions What’s New Tax computation using maximum capital gains rates. You will now use the Quali- fied Dividends and Capital Gain Tax Worksheet on page 34 of the Instructions for Form 1040 to figure your tax if you have net capital gain or qualified dividends. However, if you have any 25% rate gain (unrecaptured section 1250 gain) or 28% rate gain, you will still use the Schedule D Tax Worksheet on page D-9 to figure your tax. Part IV of Schedule D has been eliminated. Capital Loss Carryover Worksheet. Use the Capital Loss Carryover Worksheet on page D-6 to figure your capital loss carryover from 2003 to 2004. You will need a copy of your 2003 Form 1040 and Schedule D. Gain on home acquired in a like-kind exchange. If you sold or exchanged your main home that you acquired in a like-kind exchange, you may not be able to exclude any of the gain. See Sale of Your Home on page D-2 for details. Other Forms You May Have To File Use Form 4797 to report the following. 1. The sale or exchange of: a. Property used in a trade or business; b. Depreciable and amortizable property; c. Oil, gas, geothermal, or other mineral property; and d. Section 126 property. 2. The involuntary conversion (other than from casualty or theft) of property used in a trade or business and capital assets held for business or profit. 3. The disposition of noncapital assets other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business. 4. Ordinary loss on the sale, exchange, or worthlessness of small business investment company (section 1242) stock. 5. Ordinary loss on the sale, exchange, or worthlessness of small business (section 1244) stock. 6. Ordinary gain or loss on securities held in connection with your trading business, if you previously made a mark-to-market election. See Traders in Securities on page D-3. Use Form 4684 to report involuntary conversions of property due to casualty or theft. Use Form 6781 to report gains and losses from section 1256 contracts and straddles. Use Form 8824 to report like-kind exchanges. A like-kind exchange occurs when you exchange business or investment property for property of a like kind. Capital Asset Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car, stocks, and bonds are capital assets. A capital asset is any property held by you except the following. • Stock in trade or other property included in inventory or held mainly for sale to customers. • Accounts or notes receivable for services performed in the ordinary course of your trade or business or as an employee, or from the sale of stock in trade or other property held mainly for sale to customers. • Depreciable property used in your trade or business, even if it is fully depreciated. • Real estate used in your trade or business. • Copyrights, literary, musical, or artistic compositions, letters or memoranda, or similar property: (a) created by your personal efforts; (b) prepared or produced for you (in the case of letters, memoranda, or similar property); or (c) that you received from someone who created them or for whom they were created, as mentioned in D-1 Cat. No. 24331I (a) or (b), in a way (such as by gift) that entitled you to the basis of the previous owner. • U.S. Government publications, including the Congressional Record, that you received from the government, other than by purchase at the normal sales price, or that you got from someone who had received it in a similar way, if your basis is determined by reference to the previous owner’s basis. • Certain commodities derivative financial instruments held by a dealer. See section 1221(a)(6). • Certain hedging transactions entered into in the normal course of your trade or business. See section 1221(a)(7). • Supplies regularly used in your trade or business. Short Term or Long Term Separate your capital gains and losses according to how long you held or owned the property. The holding period for short-term capital gains and losses is 1 year or less. The holding period for long-term capital gains and losses is more than 1 year. To figure the holding period, begin counting on the day after you received the property and include the day you disposed of it. If you disposed of property that you acquired by inheritance, report the disposition as a long-term gain or loss, regardless of how long you held the property. A nonbusiness bad debt must be treated as a short-term capital loss. See Pub. 550 for what qualifies as a nonbusiness bad debt and how to enter it on Schedule D. Capital Gain Distributions These distributions are paid by a mutual fund (or other regulated investment company) or real estate investment trust from its net realized long-term capital gains. Distributions of net realized short-term capital gains are not treated as capital gains. Instead, they are included on Form 1099-DIV as ordinary dividends. Enter on line 13 the total capital gain distributions paid to you during the year, regardless of how long you held your in- Page 2 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. vestment. This amount is shown in box 2a of Form 1099-DIV. If there is an amount in box 2b, include that amount on line 11 of the Unrecaptured Section 1250 Gain Worksheet on page D-8 if you complete line 19 of Schedule D. If there is an amount in box 2c, see Exclusion of Gain on Qualified Small Business (QSB) Stock on page D-4. If there is an amount in box 2d, include that amount on line 4 of the 28% Rate Gain Worksheet on page D-7 if you complete line 18 of Schedule D. If you received capital gain distributions as a nominee (that is, they were paid to you but actually belong to someone else), report on line 13 only the amount that belongs to you. Attach a statement showing the full amount you received and the amount you received as a nominee. See the Instructions for Schedule B for filing requirements for Forms 1099-DIV and 1096. Sale of Your Home If you sold or exchanged your main home, do not report it on your tax return unless your gain exceeds your exclusion amount. Your exclusion amount is zero if you acquired your home in a like-kind exchange and you sold or exchanged the home after October 22, 2004, and during the 5-year period beginning on the date you acquired it. Generally, if you meet the two tests below, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirement in Test 1). Test 1. You owned and used the home as your main home for 2 years or more during the 5-year period ending on the date you sold or exchanged your home. Test 2. You have not sold or exchanged another main home during the 2-year period ending on the date of the sale or exchange of your home. Even if you do not meet one or both of the above two tests, you still can claim an exclusion if you sold or exchanged the home because of a change in place of employment, health, or certain unforeseen circumstances. In this case, the maximum amount of gain you can exclude is reduced. You can choose to have the 5-year test period for ownership and use in Test 1 above suspended during any period you or your spouse serve on qualified official extended duty as a member of the uniformed services or Foreign Service of the United States. This means you may be able to meet Test 1 even if, because of your service, you did not actually use the home as your main home for at least the required 2 years during the 5-year period ending on the date of sale. See Pub. 523 for details, including how to report any taxable gain if: • You (or your spouse if married) used any part of the home for business or rental purposes after May 6, 1997, or • Your gain exceeds your exclusion amount. Partnership Interests A sale or other disposition of an interest in a partnership may result in ordinary income, collectibles gain (28% rate gain), or unrecaptured section 1250 gain. For details on 28% rate gain, see the instructions for line 18 on page D-7. For details on unrecaptured section 1250 gain, see the instructions for line 19 beginning on page D-7. Capital Assets Held for Personal Use Generally, gain from the sale or exchange of a capital asset held for personal use is a capital gain. Report it on Schedule D, Part I or Part II. However, if you converted depreciable property to personal use, all or part of the gain on the sale or exchange of that property may have to be recaptured as ordinary income. Use Part III of Form 4797 to figure the amount of ordinary income recapture. The recapture amount is included on line 31 (and line 13) of Form 4797. Do not enter any gain for this property on line 32 of Form 4797. If you are not completing Part III for any other properties, enter “N/A” on line 32. If the total gain is more than the recapture amount, enter “From Form 4797” in column (a) of line 1 or line 8 of Schedule D, skip columns (b) through (e), and in column (f) enter the excess of the total gain over the recapture amount. Loss from the sale or exchange of a capital asset held for personal use is not deductible. But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, you must report the transaction on Schedule D even though the loss is not deductible. For example, you have a loss on the sale of a vacation home that is not your main home and you received a Form 1099-S for the transaction. Report the transaction on line 1 or 8, depending on how long you owned the home. Complete columns (a) through (e). Because the loss is not deductible, enter -0- in column (f). Nondeductible Losses Do not deduct a loss from the direct or indirect sale or exchange of property between any of the following. • Members of a family. • A corporation and an individual owning more than 50% of the corporation’s stock (unless the loss is from a distribution in complete liquidation of a corporation). • A grantor and a fiduciary of a trust. • A fiduciary and a beneficiary of the same trust. • A fiduciary and a beneficiary of another trust created by the same grantor. • An executor of an estate and a beneficiary of that estate, unless the sale or exchange was to satisfy a pecuniary bequest (that is, a bequest of a sum of money). • An individual and a tax-exempt organization controlled by the individual or the individual’s family. See Pub. 544 for more details on sales and exchanges between related parties. If you disposed of (a) an asset used in an activity to which the at-risk rules apply or D-2 (b) any part of your interest in an activity to which the at-risk rules apply, and you have amounts in the activity for which you are not at risk, see the Instructions for Form 6198. If the loss is allowable under the at-risk rules, it then may be subject to the passive activity rules. See Form 8582 and its instructions for details on reporting capital gains and losses from a passive activity. Items for Special Treatment • Transactions by a securities dealer. See section 1236. • Bonds and other debt instruments. See Pub. 550. • Certain real estate subdivided for sale that may be considered a capital asset. See section 1237. • Gain on the sale of depreciable property to a more than 50% owned entity or to a trust of which you are a beneficiary. See Pub. 544. • Gain on the disposition of stock in an interest charge domestic international sales corporation. See section 995(c). • Gain on the sale or exchange of stock in certain foreign corporations. See section 1248. • Transfer of property to a partnership that would be treated as an investment company if it were incorporated. See Pub. 541. • Sales of stock received under a qualified public utility dividend reinvestment plan. See Pub. 550. • Transfer of appreciated property to a political organization. See section 84. • In general, no gain or loss is recognized on the transfer of property from an individual to a spouse or a former spouse if the transfer is incident to a divorce. See Pub. 504. • Amounts received on the retirement of a debt instrument generally are treated as received in exchange for the debt instrument. See Pub. 550. • Any loss on the disposition of converted wetland or highly erodible cropland that is first used for farming after March 1, 1986, is reported as a long-term capital loss on Schedule D, but any gain is reported as ordinary income on Form 4797. • If qualified dividends that you reported on Form 1040, line 9b, include extraordinary dividends, any loss on the sale or exchange of the stock is a long-term capital loss to the extent of the extraordinary dividends. An extraordinary dividend is a dividend that equals or exceeds 10% (5% in the case of preferred stock) of your basis in the stock. • Amounts received by shareholders in corporate liquidations. See Pub. 550. • Cash received in lieu of fractional shares of stock as a result of a stock split or stock dividend. See Pub. 550. • Mutual fund load charges, which may not be taken into account in determining gain or loss on certain dispositions of stock in mutual funds if reinvestment rights were exercised. See Pub. 564. Page 3 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. • The sale or exchange of S corporation stock or an interest in a trust held for more than 1 year, which may result in collectibles gain (28% rate gain). See page D-7. • Gain or loss on the disposition of securities futures contracts. See Pub. 550. • Gain on the constructive sale of certain appreciated financial positions. See Pub. 550. • Certain constructive ownership transactions. Gain in excess of the gain you would have recognized if you had held a financial asset directly during the term of a derivative contract must be treated as ordinary income. See section 1260. If any portion of the constructive ownership transaction was open in any prior year, you may have to pay interest. See section 1260(b) for details, including how to figure the interest. Include the interest as an additional tax on Form 1040, line 62. Write “Section 1260(b) interest” and the amount of the interest to the left of line 62. This interest is not deductible. • The sale of publicly traded securities, if you elect to postpone gain by purchasing common stock or a partnership interest in a specialized small business investment company during the 60-day period that began on the date of the sale. See Pub. 550. • The sale of qualified securities, held for at least 3 years, to an employee stock ownership plan or eligible worker-owned cooperative, if you elect to postpone gain by purchasing qualified replacement property. See Pub. 550. • Gain or loss from the disposition of stock or other securities in an investment club. See Pub. 550. Wash Sales A wash sale occurs when you sell or otherwise dispose of stock or securities (including a contract or option to acquire or sell stock or securities) at a loss and, within 30 days before or after the sale or disposition, you directly or indirectly: • Buy substantially identical stock or securities, • Acquire substantially identical stock or securities in a fully taxable trade, or • Enter into a contract or option to acquire substantially identical stock or securities. You cannot deduct losses from wash sales unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities. The basis of the substantially identical property (or contract or option to acquire such property) is its cost increased by the disallowed loss. For more details on wash sales, see Pub. 550. Report a wash sale transaction on line 1 or 8. Enter the full amount of the (loss) in column (f). Directly below the line on which you reported the loss, enter “Wash Sale” in column (a), and enter as a positive amount in column (f) the amount of the loss not allowed. Traders in Securities You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. To be engaged in business as a trader in securities: • You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation. • Your activity must be substantial. • You must carry on the activity with continuity and regularity. The following facts and circumstances should be considered in determining if your activity is a business. • Typical holding periods for securities bought and sold. • The frequency and dollar amount of your trades during the year. • The extent to which you pursue the activity to produce income for a livelihood. • The amount of time you devote to the activity. You are considered an investor, and not a trader, if your activity does not meet the above definition of a business. It does not matter whether you call yourself a trader or a “day trader.” Like an investor, a trader must report each sale of securities (taking into account commissions and any other costs of acquiring or disposing of the securities) on Schedule D or D-1 or on an attached statement containing all the same information for each sale in a similar format. However, if a trader previously made the mark-to-market election (see below), each transaction is reported in Part II of Form 4797 instead of Schedules D and D-1. Regardless of whether a trader reports his or her gains and losses on Schedules D and D-1 or Form 4797, the gain or loss from the disposition of securities is not taken into account when figuring net earnings from self-employment on Schedule SE. See the Instructions for Schedule SE for an exception that applies to section 1256 contracts. The limitation on investment interest expense that applies to investors does not apply to interest paid or incurred in a trading business. A trader reports interest expense and other expenses (excluding commissions and other costs of acquiring or disposing of securities) from a trading business on Schedule C (instead of Schedule A). A trader also may hold securities for investment. The rules for investors generally will apply to those securities. Allocate interest and other expenses between your trading business and your investment securities. Mark-To-Market Election for Traders A trader may make an election under section 475(f) to report all gains and losses from securities held in connection with a trading business as ordinary income (or loss), including securities held at the end of the year. Securities held at the end of the year are “marked to market” by treating them as if they were sold (and reacquired) for fair market value on the last business day of the year. Generally, the election must be made by the due date (not includ- D-3 ing extensions) of the tax return for the year prior to the year for which the election becomes effective. To be effective for 2004, the election must have been made by April 15, 2004. Starting with the year the election becomes effective, a trader reports all gains and losses from securities held in connection with the trading business, including securities held at the end of the year, in Part II of Form 4797. If you previously made the election, see the Instructions for Form 4797. For details on making the mark-to-market election for 2005, see Pub. 550 or Rev. Proc. 99-17, 1999-1 C.B. 503. You can find Rev. Proc. 99-17 on page 52 of Internal Revenue Bulletin 1999-7 at www.irs.gov/pub/irs-irbs/irb99-07.pdf. If you hold securities for investment, they must be identified as such in your records on the day they are acquired (for example, by holding the securities in a separate brokerage account). Securities held for investment are not marked-to-market. Short Sales A short sale is a contract to sell property you borrowed for delivery to a buyer. At a later date, you either buy substantially identical property and deliver it to the lender or deliver property that you held but did not want to transfer at the time of the sale. Usually, your holding period is the amount of time you actually held the property eventually delivered to the lender to close the short sale. However, your gain when closing a short sale is short term if you (a) held substantially identical property for 1 year or less on the date of the short sale or (b) acquired property substantially identical to the property sold short after the short sale but on or before the date you close the short sale. If you held substantially identical property for more than 1 year on the date of a short sale, any loss realized on the short sale is a long-term capital loss, even if the property used to close the short sale was held 1 year or less. Gain or Loss From Options Report on Schedule D gain or loss from the closing or expiration of an option that is not a section 1256 contract but is a capital asset in your hands. If an option you purchased expired, enter the expiration date in column (c) and enter “EXPIRED” in column (d). If an option that was granted (written) expired, enter the expiration date in column (b) and enter “EXPIRED” in column (e). Fill in the other columns as appropriate. See Pub. 550 for details. Undistributed Capital Gains Include on line 11 the amount from box 1a of Form 2439. This represents your share of the undistributed long-term capital gains of the regulated investment company (including a mutual fund) or real estate investment trust. If there is an amount in box 1b, include that amount on line 11 of the Unrecaptured Section 1250 Gain Worksheet on page D-8 if you complete line 19 of Schedule D. Page 4 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. If there is an amount in box 1c, see Exclusion of Gain on Qualified Small Business (QSB) Stock on this page. If there is an amount in box 1d, include that amount on line 4 of the 28% Rate Gain Worksheet on page D-7 if you complete line 18 of Schedule D. Enter on Form 1040, line 69, the tax paid as shown in box 2 of Form 2439. Also on line 69, check the box for Form 2439. Add to the basis of your stock the excess of the amount included in income over the amount of the credit for the tax paid. See Pub. 550 for details. Installment Sales If you sold property (other than publicly traded stocks or securities) at a gain and you will receive a payment in a tax year after the year of sale, you generally must report the sale on the installment method unless you elect not to. Use Form 6252 to report the sale on the installment method. Also use Form 6252 to report any payment received in 2004 from a sale made in an earlier year that you reported on the installment method. To elect out of the installment method, report the full amount of the gain on Schedule D on a timely filed return (including extensions) for the year of the sale. If your original return was filed on time, you may make the election on an amended return filed no later than 6 months after the due date of your return (excluding extensions). Write “Filed pursuant to section 301.9100-2” at the top of the amended return. Demutualization of Life Insurance Companies Demutualization of a life insurance company occurs when a mutual life insurance company changes to a stock company. If you were a policyholder or annuitant of the mutual company, you may have received either stock in the stock company or cash in exchange for your equity interest in the mutual company. The basis of your equity interest in the mutual company is considered to be zero. If the demutualization transaction qualifies as a tax-free reorganization, no gain is recognized on the exchange of your equity interest in the mutual company for stock. The company can advise you if the transaction is a tax-free reorganization. Because the basis of your equity interest in the mutual company is considered to be zero, your basis in the stock received is zero. Your holding period for the new stock includes the period you held an equity interest in the mutual company. If you received cash in exchange for your equity interest, you must recognize a capital gain in an amount equal to the cash received. If you held the equity interest for more than 1 year, report the gain as a long-term capital gain on line 8. If you held the equity interest for 1 year or less, report the gain as a short-term capital gain on line 1. If the demutualization transaction does not qualify as a tax-free reorganization, you must recognize a capital gain in an amount equal to the cash and fair market value of the stock received. If you held the equity interest for more than 1 year, report the gain as a long-term capital gain on line 8. If you held the equity interest for 1 year or less, report the gain as a short-term capital gain on line 1. Your holding period for the new stock begins on the day after you received the stock. Exclusion of Gain on Qualified Small Business (QSB) Stock Section 1202 allows for an exclusion of up to 50% of the eligible gain on the sale or exchange of QSB stock. The section 1202 exclusion applies only to QSB stock held for more than 5 years. To be QSB stock, the stock must meet all of the following tests. 1. It must be stock in a C corporation (that is, not S corporation stock). 2. It must have been originally issued after August 10, 1993. 3. As of the date the stock was issued, the corporation was a domestic C corporation with total gross assets of $50 million or less (a) at all times after August 9, 1993, and before the stock was issued and (b) immediately after the stock was issued. Gross assets include those of any predecessor of the corporation. All corporations that are members of the same parent-subsidiary controlled group are treated as one corporation. 4. You must have acquired the stock at its original issue (either directly or through an underwriter), either in exchange for money or other property or as pay for services (other than as an underwriter) to the corporation. In certain cases, you may meet the test if you acquired the stock from another person who met the test (such as by gift or inheritance) or through a conversion or exchange of QSB stock you held. 5. During substantially all the time you held the stock: a. The corporation was a C corporation, b. At least 80% of the value of the corporation’s assets were used in the active conduct of one or more qualified businesses (defined below), and c. The corporation was not a foreign corporation, DISC, former DISC, regulated investment company, real estate investment trust, REMIC, FASIT, cooperative, or a corporation that has made (or that has a subsidiary that has made) a section 936 election. TIP SSBIC. A specialized small business investment company (SSBIC) is treated as having met test 5b above. Qualified Business A qualified business is any business that is not one of the following. • A business involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services. D-4 • A business whose principal asset is the reputation or skill of one or more employees. • A banking, insurance, financing, leasing, investing, or similar business. • A farming business (including the raising or harvesting of trees). • A business involving the production of products for which percentage depletion can be claimed. • A business of operating a hotel, motel, restaurant, or similar business. For more details about limits and additional requirements that may apply, see section 1202. Pass-Through Entities If you held an interest in a pass-through entity (a partnership, S corporation, or mutual fund or other regulated investment company) that sold QSB stock, to qualify for the exclusion you must have held the interest on the date the pass-through entity acquired the QSB stock and at all times thereafter until the stock was sold. How To Report Report on line 8 the entire gain realized on the sale of QSB stock. Complete all columns as indicated. Directly below the line on which you reported the gain, enter in column (a) “Section 1202 exclusion” and enter as a loss in column (f) the amount of the allowable exclusion. If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet on page D-7. Gain from Form 1099-DIV. If you received a Form 1099-DIV with a gain in box 2c, part or all of that gain (which is also included in box 2a) may be eligible for the section 1202 exclusion. In column (a) of line 8, enter the name of the corporation whose stock was sold. In column (f), enter the amount of your allowable exclusion as a loss. If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet on page D-7. Gain from Form 2439. If you received a Form 2439 with a gain in box 1c, part or all of that gain (which is also included in box 1a) may be eligible for the section 1202 exclusion. In column (a) of line 8, enter the name of the corporation whose stock was sold. In column (f), enter the amount of your allowable exclusion as a loss. If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet on page D-7. Gain from an installment sale of QSB stock. If all payments are not received in the year of sale, a sale of QSB stock that is not traded on an established securities market generally is treated as an installment sale and is reported on Form 6252. Figure the allowable section 1202 exclusion for the year by multiplying the total amount of the exclusion by a fraction, the numerator of which is the amount of eligible gain to be recognized for the tax year and the denominator of which is the total amount of eligi- Page 5 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. ble gain. In column (a) of line 8, enter the name of the corporation whose stock was sold. In column (f), enter the amount of your allowable exclusion as a loss. If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet on page D-7. Alternative minimum tax. You must enter 7% of your allowable exclusion for the year on line 12 of Form 6251. Rollover of Gain From QSB Stock If you sold QSB stock (defined on page D-4) that you held for more than 6 months, you may elect to postpone gain if you purchase other QSB stock during the 60-day period that began on the date of the sale. A pass-through entity also may make the election to postpone gain. The benefit of the postponed gain applies to your share of the entity’s postponed gain if you held an interest in the entity for the entire period the entity held the QSB stock. If a pass-through entity sold QSB stock held for more than 6 months and you held an interest in the entity for the entire period the entity held the stock, you also may elect to postpone gain if you, rather than the pass-through entity, purchase the replacement QSB stock within the 60-day period. You must recognize gain to the extent the sale proceeds exceed the cost of the replacement stock. Reduce the basis of the replacement stock by any postponed gain. You must make the election no later than the due date (including extensions) for filing your tax return for the tax year in which the QSB stock was sold. If your original return was filed on time, you may make the election on an amended return filed no later than 6 months after the due date of your return (excluding extensions). Write “Filed pursuant to section 301.9100-2” at the top of the amended return. To make the election, report the entire gain realized on the sale on line 1 or 8. Directly below the line on which you reported the gain, enter in column (a) “Section 1045 rollover,” and enter the amount of the postponed gain as a (loss) in column (f). Rollover of Gain From Empowerment Zone Assets If you sold a qualified empowerment zone asset that you held for more than 1 year, you may be able to elect to postpone part or all of the gain that you would otherwise include on Schedule D. If you make the election, the gain on the sale generally is recognized only to the extent, if any, that the amount realized on the sale exceeds the cost of qualified empowerment zone assets (replacement property) you purchased during the 60-day period beginning on the date of the sale. The following rules apply. • No portion of the cost of the replacement property may be taken into account to the extent the cost is taken into account to exclude gain on a different empowerment zone asset. • The replacement property must qualify as an empowerment zone asset with respect to the same empowerment zone as the asset sold. • You must reduce the basis of the replacement property by the amount of postponed gain. • This election does not apply to any gain (a) treated as ordinary income or (b) attributable to real property, or an intangible asset, which is not an integral part of an enterprise zone business. • The District of Columbia enterprise zone is not treated as an empowerment zone for this purpose. • The election is irrevocable without IRS consent. See Pub. 954 for the definition of empowerment zone and enterprise zone business. You can find out if your business is located within an empowerment zone by using the RC/EZ/EC Address Locator at www.hud.gov/crlocator. Qualified empowerment zone assets are: 1. Tangible property, if: a. You acquired the property after December 21, 2000, b. The original use of the property in the empowerment zone began with you, and c. Substantially all of the use of the property, during substantially all of the time that you held it, was in your enterprise zone business; and 2. Stock in a domestic corporation or a capital or profits interest in a domestic partnership, if: a. You acquired the stock or partnership interest after December 21, 2000, solely in exchange for cash, from the corporation at its original issue (directly or through an underwriter) or from the partnership; b. The business was an enterprise zone business (or a new business being organized as an enterprise zone business) as of the time you acquired the stock or partnership interest; and c. The business qualified as an enterprise zone business during substantially all of the time during which you held the stock or partnership interest. How to report. Report the entire gain real- ized from the sale as you otherwise would without regard to the election. On Schedule D, line 8, enter “Section 1397B Rollover” in column (a) and enter as a loss in column (f) the amount of gain included on Schedule D that you are electing to postpone. If you are reporting the sale directly on Schedule D, line 8, use the line directly below the line on which you are reporting the sale. See section 1397B for more details. Exclusion of Gain From DC Zone Assets If you sold or exchanged a District of Columbia Enterprise Zone (DC Zone) asset that you held for more than 5 years, you may be able to exclude the amount of qualified capital gain that you would otherwise D-5 include on Schedule D. The exclusion applies to an interest in, or property of, certain businesses operating in the District of Columbia. DC Zone asset. A DC Zone asset is any of the following. • DC Zone business stock. • DC Zone partnership interest. • DC Zone business property. Qualified capital gain. Qualified capital gain is any gain recognized on the sale or exchange of a DC Zone asset that is a capital asset or property used in a trade or business. It does not include any of the following gains. • Gain treated as ordinary income under section 1245. • Section 1250 gain figured as if section 1250 applied to all depreciation rather than the additional depreciation. • Gain attributable to real property, or an intangible asset, that is not an integral part of a DC Zone business. • Gain from a related-party transaction. See Sales and Exchanges Between Related Persons in chapter 2 of Pub. 544. See Pub. 954 and section 1400B for more details on DC Zone assets and special rules. How to report. Report the entire gain realized from the sale or exchange as you otherwise would without regard to the exclusion. On Schedule D, line 8, enter “DC Zone Asset” in column (a) and enter as a loss in column (f) the amount of the allowable exclusion. If you are reporting the sale directly on Schedule D, line 8, use the line directly below the line on which you are reporting the sale. Specific Instructions Lines 1 and 8 Enter all sales and exchanges of capital assets, including stocks, bonds, etc., and real estate (if not reported on Form 4684, 4797, 6252, 6781, or 8824). But do not report the sale or exchange of your main home unless required (see page D-2). Include these transactions even if you did not receive a Form 1099-B or 1099-S (or substitute statement) for the transaction. You can use stock ticker symbols or abbreviations to describe the property as long as they are based on the descriptions of the property as shown on Form 1099-B or 1099-S (or substitute statement). Use Schedule D-1 to list additional transactions for lines 1 and 8. Use as many Schedules D-1 as you need. Enter on Schedule D, lines 2 and 9, the combined totals from all your Schedules D-1. Add the following amounts reported to you for 2004 on Forms 1099-B and 1099-S (or substitute statements) that you are not reporting on another form or schedule included with your return: (a) proceeds from transactions involving stocks, bonds, and other securities and (b) gross proceeds from real estate transactions (other than the Page 6 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. sale of your main home if you are not required to report it). If this total is more than the total of lines 3 and 10, attach an explanation of the difference (for example, you were the nominee for the actual owner of the property). Column (b)—Date Acquired Enter in this column the date the asset was acquired. Use the trade date for stocks and bonds traded on an exchange or over-the-counter market. For stock or other property sold short, enter the date the stock or property was delivered to the broker or lender to close the short sale. The date acquired for an asset you held on January 1, 2001, for which you made an election to recognize any gain in a deemed sale is the date of the deemed sale and reacquisition. If you disposed of property that you acquired by inheritance, report the gain or (loss) on line 8 and enter “INHERITED” in column (b) instead of the date you acquired the property. If you sold a block of stock (or similar property) that was acquired through several different purchases, you may report the sale on one line and enter “VARIOUS” in column (b). However, you still must report the short-term gain or (loss) on the sale in Part I and the long-term gain or (loss) in Part II. Column (c)—Date Sold Enter in this column the date the asset was sold. Use the trade date for stocks and bonds traded on an exchange or over-the-counter market. For stock or other property sold short, enter the date you sold the stock or property you borrowed to open the short sale transaction. Column (d)—Sales Price Enter in this column either the gross sales price or the net sales price from the sale. If you sold stocks or bonds and you received a Form 1099-B (or substitute statement) from your broker that shows gross sales price, enter that amount in column (d). But if Form 1099-B (or substitute statement) indicates that gross proceeds minus commissions and option premiums were reported to the IRS, enter that net amount in column (d). If you enter the net amount in column (d), do not include the commissions and option premiums from the sale in column (e). You should not have received a Form 1099-B (or substitute statement) for a transaction merely representing the return of your original investment in a nontransferable obligation, such as a savings bond or a certificate of deposit. But if you did, report the amount shown on Form 1099-B (or substitute statement) in both columns (d) and (e). Be sure to add all sales price entries on lines 1 and 8, column (d), to amounts on lines 2 and 9, column (d). Enter the totals on lines 3 and 10. Column (e)—Cost or Other Basis In general, the cost or other basis is the cost of the property plus purchase commissions and improvements, minus depreciation, amortization, and depletion. If you inherited the property, got it as a gift, or received it in a tax-free exchange, involuntary conversion, or “wash sale” of stock, you may not be able to use the actual cost as the basis. If you do not use the actual cost, attach an explanation of your basis. If you sold stock, adjust your basis by subtracting all the nondividend distributions you received before the sale. Also adjust your basis for any stock splits. See Pub. 550 for details. If you elected to recognize gain on an asset held on January 1, 2001, your basis in Capital Loss Carryover Worksheet—Lines 6 and 14 the asset is its closing market price or fair market value, whichever applies, on the date of the deemed sale and reacquisition, whether the deemed sale resulted in a gain or an unallowed loss. You may elect to use an average basis for all shares of a mutual fund if you acquired the shares at various times and prices and you left the shares on deposit in an account handled by a custodian or agent who acquired or redeemed those shares. If you are reporting an average basis, include “AVGB” in column (a) of Schedule D. For details on making the election and how to figure average basis, see Pub. 564. The basis of property acquired by gift is generally the basis of the property in the hands of the donor. The basis of property acquired from a decedent is generally the fair market value at the date of death. See Pub. 551 for details. Increase the cost or other basis of an original issue discount (OID) debt instrument by the amount of OID that has been included in gross income for that instrument. See Pub. 550 for details. If a charitable contribution deduction is allowed because of a bargain sale of property to a charitable organization, the adjusted basis for purposes of determining gain from the sale is the amount that has the same ratio to the adjusted basis as the amount realized has to the fair market value. See Pub. 544 for details. Increase your cost or other basis by any expense of sale, such as broker’s fees, commissions, state and local transfer taxes, and option premiums, before making an entry in column (e), unless you reported the net sales price in column (d). For more details, see Pub. 551. Keep for Your Records Use this worksheet to figure your capital loss carryovers from 2003 to 2004 if your 2003 Schedule D, line 18, is a loss and (a) that loss is a smaller loss than the loss on your 2003 Schedule D, line 17a, or (b) your 2003 Form 1040, line 38, is a loss. Otherwise, you do not have any carryovers. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Enter the amount from your 2003 Form 1040, line 38. If a loss, enclose the amount in parentheses . . . . . . . . . . Enter the loss from your 2003 Schedule D, line 18, as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combine lines 1 and 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the smaller of line 2 or line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If line 7b of your 2003 Schedule D is a loss, go to line 5; otherwise, enter -0- on line 5 and go to line 9. Enter the loss from your 2003 Schedule D, line 7b, as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter any gain from your 2003 Schedule D, line 16 . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Add lines 4 and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term capital loss carryover for 2004. Subtract line 7 from line 5. If zero or less, enter -0-. If more than zero, also enter this amount on Schedule D, line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If line 16 of your 2003 Schedule D is a loss, go to line 9; otherwise, skip lines 9 through 13. Enter the loss from your 2003 Schedule D, line 16, as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter any gain from your 2003 Schedule D, line 7b . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Subtract line 5 from line 4. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Add lines 10 and 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term capital loss carryover for 2004. Subtract line 12 from line 9. If zero or less, enter -0-. If more than zero, also enter this amount on Schedule D, line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-6 1. 2. 3. 4. 5. 7. 8. 9. 12. 13. Page 7 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Column (f)—Gain or (Loss) You must make a separate entry in this column for each transaction reported on lines 1 and 8 and any other line(s) that applies to you. For lines 1 and 8, subtract the amount in column (e) from the amount in column (d). Enter negative amounts in parentheses. Line 18 If you checked “Yes” on line 17, complete the worksheet below if either of the following apply for 2004. • You reported in Part II a section 1202 exclusion from the eligible gain on qualified small business stock (see page D-4), or • You reported in Part II a collectibles gain or (loss). A collectibles gain or (loss) is any long-term gain or deductible long-term loss from the sale or exchange of a collectible that is a capital asset. Collectibles include works of art, rugs, antiques, metals (such as gold, silver, and platinum bullion), gems, stamps, coins, alcoholic beverages, and certain other tangible property. Include on the worksheet any gain (but not loss) from the sale or exchange of an interest in a partnership, S corporation, or trust held for more than 1 year and attributable to unrealized appreciation of collectibles. For details, see Regulations section 1.1(h)-1. Also, attach the statement required under Regulations section 1.1(h)-1(e). Line 19 If you checked “Yes” on line 17, complete the worksheet on page D-8 if any of the following apply for 2004. • You sold or otherwise disposed of section 1250 property (generally, real property that you depreciated) held more than 1 year. • You received installment payments for section 1250 property held more than 1 year for which you are reporting gain on the installment method. • You received a Schedule K-1 from an estate or trust, partnership, or S corporation that shows “unrecaptured section 1250 gain.” • You received a Form 1099-DIV or Form 2439 from a real estate investment trust or regulated investment company (including a mutual fund) that reports “unrecaptured section 1250 gain.” • You reported a long-term capital gain from the sale or exchange of an interest in a partnership that owned section 1250 property. Instructions for the Unrecaptured Section 1250 Gain Worksheet Lines 1 through 3. If you had more than one property described on line 1, complete lines 1 through 3 for each property on a separate worksheet. Enter the total of the line 3 amounts for all properties on line 3 and go to line 4. Line 4. To figure the amount to enter on line 4, follow the steps below for each installment sale of trade or business property held more than 1 year. Step 1. Figure the smaller of (a) the depreciation allowed or allowable or (b) the total gain for the sale. This is the smaller of line 22 or line 24 of your 2004 Form 4797 (or the comparable lines of Form 4797 for the year of sale) for the property. Step 2. Reduce the amount figured in step 1 by any section 1250 ordinary income recapture for the sale. This is the amount from line 26g of your 2004 Form 4797 (or the comparable line of Form 4797 for the year of sale) for the property. The result is your total unrecaptured section 1250 gain that must be allocated to the installment payments received from the sale. Step 3. Generally, the amount of section 1231 gain on each installment payment 28% Rate Gain Worksheet—Line 18 is treated as unrecaptured section 1250 gain until the total unrecaptured section 1250 gain figured in step 2 has been used in full. Figure the amount of gain treated as unrecaptured section 1250 gain for installment payments received in 2004 as the smaller of (a) the amount from line 26 or line 37 of your 2004 Form 6252, whichever applies, or (b) the amount of unrecaptured section 1250 gain remaining to be reported. This amount is generally the total unrecaptured section 1250 gain for the sale reduced by all gain reported in prior years (excluding section 1250 ordinary income recapture). However, if you chose not to treat all of the gain from payments received after May 6, 1997, and before August 24, 1999, as unrecaptured section 1250 gain, use only the amount you chose to treat as unrecaptured section 1250 gain for those payments to reduce the total unrecaptured section 1250 gain remaining to be reported for the sale. Include this amount on line 4. Line 10. Include on line 10 your share of the partnership’s unrecaptured section 1250 gain that would result if the partnership had transferred all of its section 1250 property in a fully taxable transaction immediately before you sold or exchanged your interest in that partnership. If you recognized less than all of the realized gain, the partnership will be treated as having transferred only a proportionate amount of each section 1250 property. For details, see Regulations section 1.1(h)-1. Also attach the statement required under Regulations section 1.1(h)-1(e). Line 12. An example of an amount to include on line 12 is unrecaptured section 1250 gain from the sale of a vacation home you previously used as a rental property but converted to personal use prior to the sale. To figure the amount to enter on line 12, Keep for Your Records 1. Enter the total of all collectibles gain or (loss) from items you reported on line 8, column (f), of Schedules D and D-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Enter as a positive number the amount of any section 1202 exclusion you reported on line 8, column (f), of Schedules D and D-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Enter the total of all collectibles gain or (loss) from Form 4684, line 4 (but only if Form 4684, line 15, is more than zero); Form 6252; Form 6781, Part II; and Form 8824 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Enter the total of any collectibles gain reported to you on: • Form 1099-DIV, box 2d; ................ • Form 2439, box 1d; and • Schedule K-1 from a partnership, S corporation, estate, or trust. 5. Enter your long-term capital loss carryovers from Schedule D, line 14, and Schedule K-1 (Form 1041), line 13c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. If Schedule D, line 7, is a (loss), enter that (loss) here. Otherwise, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . 7. Combine lines 1 through 6. If zero or less, enter -0-. If more than zero, also enter this amount on Schedule D, line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } D-7 1. 2. 3. 4. 5. ( ) 6. ( ) 7. Page 8 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. follow the applicable instructions below. Installment sales. To figure the amount to include on line 12, follow the steps below for each installment sale of property held more than 1 year for which you did not make an entry in Part I of your Form 4797 for the year of sale. • Step 1. Figure the smaller of (a) the depreciation allowed or allowable or (b) the total gain for the sale. This is the smaller of line 22 or line 24 of your 2004 Form 4797 (or the comparable lines of Form 4797 for the year of sale) for the property. • Step 2. Reduce the amount figured in step 1 by any section 1250 ordinary income recapture for the sale. This is the amount from line 26g of your 2004 Form 4797 (or the comparable line of Form 4797 for the year of sale) for the property. The result is your total unrecaptured section 1250 gain that must be allocated to the installment payments received from the sale. • Step 3. Generally, the amount of capital gain on each installment payment is treated as unrecaptured section 1250 gain until the total unrecaptured section 1250 gain figured in step 2 has been used in full. Figure the amount of gain treated as unrecaptured section 1250 gain for installment payments received in 2004 as the smaller of (a) the amount from line 26 or line 37 of your 2004 Form 6252, whichever applies, or (b) the amount of unrecaptured section 1250 gain remaining to be reported. This amount is generally the total unrecaptured section 1250 gain for the sale reduced by all gain reported in prior years (excluding section 1250 ordinary income recapture). However, if you chose not to treat all of the gain from payments received after May 6, 1997, and before August 24, 1999, as unrecaptured section 1250 gain, use only the amount you chose to treat as unrecaptured section 1250 gain for those payments to reduce the total unrecaptured section 1250 gain remaining to be reported for the sale. Include this amount on line 12. Other sales or dispositions of section 1250 property. For each sale of property held more than 1 year (for which you did not make an entry in Part I of Form 4797), figure the smaller of (a) the depreciation allowed or allowable or (b) the total gain for the sale. This is the smaller of line 22 or line 24 of Form 4797 for the property. Next, reduce that amount by any section 1250 ordinary income recapture for the sale. This is the amount from line 26g of Form 4797 for the property. The result is the total unrecaptured section 1250 gain for the sale. Include this amount on line 12. Line 21 Limit on capital losses. For 2004, you may deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately). Enter on line 21 the smaller of (a) the loss on line 16 or (b) ($3,000), or if married filing separately, ($1,500). When figuring which amount is smaller, treat both amounts as positive numbers. Capital loss carryover. You have a capital loss carryover from 2004 to 2005 if you have a loss on line 16 and either: • That loss is more than the loss on line 21, or • Form 1040, line 40, is less than zero. To figure any capital loss carryover to 2005, you will use the Capital Loss Carryover Worksheet in the 2005 Instructions for Schedule D. If you want to figure your carryover now, see Pub. 550. TIP Unrecaptured Section 1250 Gain Worksheet—Line 19 You will need a copy of your 2004 Form 1040 and Schedule D to figure your capital loss carryover to 2005. Keep for Your Records If you are not reporting a gain on Form 4797, line 7, skip lines 1 through 9 and go to line 10. 1. If you have a section 1250 property in Part III of Form 4797 for which you made an entry in Part I of Form 4797 (but not on Form 6252), enter the smaller of line 22 or line 24 of Form 4797 for that property. If you did not have any such property, go to line 4. If you had more than one such property, see instructions . . . . . . . . . . . . . 2. Enter the amount from Form 4797, line 26g, for the property for which you made an entry on line 1 . . . . . . . . 3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Enter the total unrecaptured section 1250 gain included on line 26 or line 37 of Form(s) 6252 from installment sales of trade or business property held more than 1 year (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Enter the total of any amounts reported to you on a Schedule K-1 from a partnership or an S corporation as “unrecaptured section 1250 gain” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Add lines 3 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Enter the smaller of line 6 or the gain from Form 4797, line 7 . . . . . . . . . . . . . . . . . . 7. 8. Enter the amount, if any, from Form 4797, line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 9. Subtract line 8 from line 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Enter the amount of any gain from the sale or exchange of an interest in a partnership attributable to unrecaptured section 1250 gain (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Enter the total of any amounts reported to you on a Schedule K-1, Form 1099-DIV, or Form 2439 as “unrecaptured section 1250 gain” from an estate, trust, real estate investment trust, or mutual fund (or other regulated investment company) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Enter the total of any unrecaptured section 1250 gain from sales (including installment sales) or other dispositions of section 1250 property held more than 1 year for which you did not make an entry in Part I of Form 4797 for the year of sale (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Add lines 9 through 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. If you had any section 1202 gain or collectibles gain or (loss), enter the total of lines 1 through 4 of the 28% Rate Gain Worksheet on page D-7. Otherwise, enter -0- . . . . . . 14. 15. Enter the (loss), if any, from Schedule D, line 7. If Schedule D, line 7, is zero or a gain, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. ( ) 16. Enter your long-term capital loss carryovers from Schedule D, line 14, and Schedule K-1 (Form 1041), line 13c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. ( ) 17. Combine lines 14 through 16. If the result is a (loss), enter it as a positive amount. If the result is zero or a gain, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. Unrecaptured section 1250 gain. Subtract line 17 from line 13. If zero or less, enter -0-. If more than zero, enter the result here and on Schedule D, line 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-8 1. 2. 3. 4. 5. 6. 9. 10. 11. 12. 13. 17. 18. Page 9 of 9 of 2004 Instructions for Schedule D 9:58 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Schedule D Tax Worksheet Keep for Your Records Complete this worksheet only if line 18 or line 19 of Schedule D is more than zero. Otherwise, complete the Qualified Dividends and Capital Gain Tax Worksheet on page 34 of the Instructions for Form 1040 to figure your tax. Exception: Do not use the Qualified Dividends and Capital Gain Tax Worksheet or this worksheet to figure your tax if: • Line 15 or line 16 of Schedule D is zero or less and you have no qualified dividends on Form 1040, line 9b, or • Form 1040, line 42, is zero or less. Instead, see the instructions for Form 1040, line 43. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Enter your taxable income from Form 1040, line 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter your qualified dividends from Form 1040, line 9b . . . . . 2. Enter the amount from Form 4952, line 4g 3. Enter the amount from Form 4952, line 4e* 4. Subtract line 4 from line 3. If zero or less, enter -0- . . . . . . . . 5. Subtract line 5 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . 6. Enter the smaller of line 15 or line 16 of Schedule D . . . . . . . 7. Enter the smaller of line 3 or line 4 . . . . . . . . . . . . . . . . . . 8. Subtract line 8 from line 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . 9. Add lines 6 and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Add lines 18 and 19 of Schedule D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Enter the smaller of line 9 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Subtract line 12 from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtract line 13 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the smaller of: • The amount on line 1 or • $29,050 if single or married filing separately; . . . . . . . . 15. $58,100 if married filing jointly or qualifying widow(er); or $38,900 if head of household Enter the smaller of line 14 or line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Subtract line 10 from line 1. If zero or less, enter -0- . . . . . . . 17. Enter the larger of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 䊳 18. If lines 15 and 16 are the same, skip lines 19 and 20 and go to line 21. Otherwise, go to line 19. Subtract line 16 from line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 䊳 19. Multiply line 19 by 5% (.05) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If lines 1 and 15 are the same, skip lines 21 through 33 and go to line 34. Otherwise, go to line 21. Enter the smaller of line 1 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21. Enter the amount from line 19 (if line 19 is blank, enter -0-) . . . . . . . . . . . . . . . . 22. Subtract line 22 from line 21. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 䊳 23. Multiply line 23 by 15% (.15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If Schedule D, line 19, is zero or blank, skip lines 25 through 30 and go to line 31. Otherwise, go to line 25. Enter the smaller of line 9 above or Schedule D, line 19 . . . . . . . . . . . . . . . . . . . 25. Add lines 10 and 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26. Enter the amount from line 1 above . . . . . . . . . . . . . . . . . . 27. Subtract line 27 from line 26. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . 28. Subtract line 28 from line 25. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 䊳 29. Multiply line 29 by 25% (.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If Schedule D, line 18, is zero or blank, skip lines 31 through 33 and go to line 34. Otherwise, go to line 31. Add lines 18, 19, 23, and 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31. Subtract line 31 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32. Multiply line 32 by 28% (.28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure the tax on the amount on line 18. Use the Tax Table or Tax Computation Worksheet, whichever applies . . . . . . . . . Add lines 20, 24, 30, 33, and 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure the tax on the amount on line 1. Use the Tax Table or Tax Computation Worksheet, whichever applies . . . . . . . . . . Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 35 or line 36. Also include this amount on Form 1040, line 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . 13. 14. . 20. . 24. . 30. . . . . 33. 34. 35. 36. . 37. } 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. *If applicable, enter instead the smaller amount you entered on the dotted line next to line 4e of Form 4952. D-9 PAGER/SGML Userid: ________ Fileid: I1040SE.XML Leading adjust: 0/-20/-20% ( 3-Nov-2004) ❏ Draft (Init. & date) ❏ Ok to Print Filename: D:\USERS\pzqbb\documents\Epicfiles\04i1040Sch_E.xml Page 1 of 6 of 2004 Instructions for Schedule E (Form 1040) 11:29 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule E (Form 1040) Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs. Supplemental You can attach your own schedule(s) to report income or loss from any of these sources. Use the same format as on Schedule E. Income and Enter separately on Schedule E the total income and the total loss for each part. Enclose loss figures in (parentheses). Loss Section references are to the Internal Revenue Code. General Instructions At-Risk Rules Generally, you must complete Form 6198 to figure your allowable loss if you have: • A loss from an activity carried on as a trade or business or for the production of income, and • Amounts in the activity for which you are not at risk. The at-risk rules generally limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the activity. However, the at-risk rules do not apply to losses from an activity of holding real property, if you acquired your interest in the activity before 1987 and the property was placed in service before 1987. The activity of holding mineral property does not qualify for this exception. In most cases, you are not at risk for amounts such as the following. • Nonrecourse loans used to finance the activity, to acquire property used in the activity, or to acquire your interest in the activity that are not secured by your own property (other than property used in the activity). However, there is an exception for certain nonrecourse financing borrowed by you in connection with holding real property. See Qualified nonrecourse financing below. • Cash, property, or borrowed amounts used in the activity (or contributed to the activity, or used to acquire your interest in the activity) that are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance and insurance against tort liability). • Amounts borrowed for use in the activity from a person who has an interest in the activity (other than as a creditor) or who is related, under section 465(b)(3), to a person (other than you) having such an interest. Qualified nonrecourse financing. Qualified nonrecourse financing is treated as an amount at risk if it is secured by real property used in an activity of holding real property that is subject to the at-risk rules. Qualified nonrecourse financing is financing for which no one is personally liable for repayment and is: • Borrowed by you in connection with holding real property, • Not convertible from a debt obligation to an ownership interest, and • Loaned or guaranteed by any federal, state, or local government, or borrowed by you from a qualified person. Qualified person. A qualified person is a person who actively and regularly engages in the business of lending money, such as a bank or savings and loan association. A qualified person cannot be: • Related to you (unless the nonrecourse financing obtained is commercially reasonable and on the same terms as loans involving unrelated persons), • The seller of the property (or a person related to the seller), or • A person who receives a fee due to your investment in real property (or a person related to that person). Passive Activity Loss Rules The passive activity loss rules may limit the amount of losses you can deduct. These rules apply to losses in Parts I, II, and III, and line 40 of Schedule E. Losses from passive activities may be subject first to the at-risk rules. Losses deductible under the at-risk rules are then subject to the passive activity loss rules. You generally can deduct losses from passive activities only to the extent of income from passive activities. An exception applies to certain rental real estate activities (explained on page E-2). Passive Activity A passive activity is any business activity in which you did not materially participate and any rental activity, except as explained on this page and page E-2. If you are a limited partner, you generally are not treated as having materially participated in the partnership’s activities for the year. The rental of real or personal property is generally a rental activity under the passive activity loss rules, but exceptions apply. If your rental of property is not treated as a rental activity, you must determine whether E-1 Cat. No. 24332T it is a trade or business activity, and if so, whether you materially participated in the activity for the tax year. See the Instructions for Form 8582 to determine whether you materially participated in the activity and for the definition of “rental activity.” See Pub. 925 for special rules that apply to rentals of: • Substantially nondepreciable property, • Property incidental to development activities, and • Property to activities in which you materially participate. Activities That Are Not Passive Activities Activities of real estate professionals. If you were a real estate professional in 2004, any rental real estate activity in which you materially participated is not a passive activity. You were a real estate professional only if you met both of the following conditions. 1. More than half of the personal services you performed in trades or businesses were performed in real property trades or businesses in which you materially participated. 2. You performed more than 750 hours of services in real property trades or businesses in which you materially participated. For purposes of this rule, each interest in rental real estate is a separate activity, unless you elect to treat all your interests in rental real estate as one activity. To make this election, attach a statement to your original tax return that declares you are a qualifying taxpayer for the year and you are making the election under section 469(c)(7)(A). The election applies for the year made and all later years in which you are a real estate professional. You can revoke the election only if your facts and circumstances materially change. If you are married filing jointly, either you or your spouse must separately meet both of the above conditions, without taking into account services performed by the other spouse. Page 2 of 6 of 2004 Instructions for Schedule E (Form 1040) 11:29 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. A real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business. Services you performed as an employee are not treated as performed in a real property trade or business unless you owned more than 5% of the stock (or more than 5% of the capital or profits interest) in the employer. If you were a real estate professional for 2004, complete line 43 on page 2 of Schedule E. Other activities. The rental of your home that you also used for personal purposes is not a passive activity. See the instructions for line 2 on page E-3. A working interest in an oil or gas well that you held directly or through an entity that did not limit your liability is not a passive activity even if you did not materially participate. Royalty income not derived in the ordinary course of a trade or business reported on Schedule E generally is not considered income from a passive activity. For more details on passive activities, see the Instructions for Form 8582 and Pub. 925. Exception for Certain Rental Real Estate Activities If you meet all three of the following conditions, your rental real estate losses are not limited by the passive activity loss rules. If you do not meet all three of these conditions, see the Instructions for Form 8582 to find out if you must complete and attach Form 8582 to figure any losses allowed. 1. Rental real estate activities are your only passive activities. 2. You do not have any prior year unallowed losses from any passive activities. 3. All of the following apply if you have an overall net loss from these activities: a. You actively participated (defined below) in all of the rental real estate activities; b. If married filing separately, you lived apart from your spouse all year; c. Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately); d. You have no current or prior year unallowed credits from passive activities; and e. Your modified adjusted gross income (defined later) is $100,000 or less ($50,000 or less if married filing separately). Active participation. You can meet the ac- tive participation requirement without regular, continuous, and substantial involvement in real estate activities. But you must have participated in making management decisions or arranging for others to provide services (such as repairs) in a significant and bona fide sense. Such management decisions include: • Approving new tenants, • Deciding on rental terms, • Approving capital or repair expenditures, and • Other similar decisions. You are not considered to actively participate if, at any time during the tax year, your interest (including your spouse’s interest) in the activity was less than 10% by value of all interests in the activity. Modified adjusted gross income. This is your adjusted gross income from Form 1040, line 36, without taking into account: • Any passive activity loss, • Rental real estate losses allowed under the exception for real estate professionals (explained on page E-1), • Taxable social security or tier 1 railroad retirement benefits, • Deductible contributions to a traditional IRA or certain other qualified retirement plans under section 219, • The student loan interest deduction, • The tuition and fees deduction, • The deduction for one-half of self-employment tax, and • Any excluded amounts under an employer’s adoption assistance program. However, if you file Form 8815, include in your modified adjusted gross income the savings bond interest excluded on line 14 of that form. Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction in which you participated. Form 8886 must be filed for each tax year that your federal income tax liability is affected by your participation in the transaction. You may have to pay a penalty if you are required to file Form 8886 but do not do so. The following are reportable transactions. • Any transaction that is the same as or substantially similar to tax avoidance transactions identified by the IRS. • Any transaction offered under conditions of confidentiality for which you paid an advisor a minimum fee. • Any transaction for which you have contractual protection against disallowance of the tax benefits. • Any transaction resulting in a loss of at least $2 million in any single tax year or $4 million in any combination of tax years. (At least $50,000 for a single tax year if the loss arose from a foreign currency transaction defined in section 988(c)(1), whether or not the loss flows through from an S corporation or partnership.) • Any transaction resulting in a book-tax difference of more than $10 million on a gross basis. E-2 • Any transaction resulting in a tax credit of more than $250,000, if you held the asset generating the credit for 45 days or less. See the Instructions for Form 8886 for more details and exceptions. Tax Shelter Registration Number Complete and attach Form 8271 if you are claiming or reporting any income, deduction, loss, credit, or other tax benefit, from an interest purchased or otherwise acquired in a tax shelter required to be registered with the IRS. Form 8271 is used to report the name, tax shelter registration number, and identifying number of the tax shelter. There is a $250 penalty if you do not report the registration number of the tax shelter on your tax return. Specific Instructions Filers of Form 1041 If you are a fiduciary filing Schedule E with Form 1041, enter the estate’s or trust’s employer identification number (EIN) in the space for “Your social security number.” Part I Income or Loss From Rental Real Estate and Royalties Use Part I to report: • Income and expenses from rental real estate (including personal property leased with real estate), and • Royalty income and expenses. See the instructions for lines 3 and 4 to determine if you should report your rental real estate and royalty income on Schedule C, Schedule C-EZ, or Form 4835 instead of Schedule E. If you own a part interest in a rental real estate property, report only your part of the income and expenses on Schedule E. Complete lines 1 and 2 for each rental real estate property. Leave these lines blank for each royalty property. If you have more than three rental real estate or royalty properties, complete and attach as many Schedules E as you need to list them. But fill in the “Totals” column on only one Schedule E. The figures in the “Totals” column on that Schedule E should be the combined totals of all your Schedules E. If you are also using page 2 of Schedule E, use the same Schedule E on Page 3 of 6 of 2004 Instructions for Schedule E (Form 1040) 11:29 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. which you entered the combined totals for Part I. Personal property. Do not use Schedule E to report income and expenses from the rental of personal property, such as equipment or vehicles. Instead, use Schedule C or C-EZ if you are in the business of renting personal property. You are in the business of renting personal property if the primary purpose for renting the property is income or profit and you are involved in the rental activity with continuity and regularity. If your rental of personal property is not a business, see the Instructions for Form 1040, lines 21 and 35, to find out how to report the income and expenses. Extraterritorial income exclusion. Except as otherwise provided in the Internal Revenue Code, gross income includes all income from whatever source derived. Gross income, however, does not include extraterritorial income that is qualifying foreign trade income. Use Form 8873 to figure the extraterritorial income exclusion. Report it on Schedule E as explained in the Instructions for Form 8873. • Any days you used the unit as your main home before or after renting it or offering it for rent, if you rented or tried to rent it for at least 12 consecutive months (or for a period of less than 12 consecutive months at the end of which you sold or exchanged it). Check “Yes” if you or your family used the unit for personal purposes in 2004 more than the greater of: 1. 14 days, or 2. 10% of the total days it was rented to others at a fair rental price. Otherwise, check “No.” If you checked “No,” you can deduct all your expenses for the rental part, subject to the At-Risk Rules and the Passive Activity Loss Rules explained beginning on page E-1. If you checked “Yes” and rented the unit out for fewer than 15 days, do not report the rental income and do not deduct any rental expenses. If you itemize deductions on Schedule A, you can deduct allowable interest, taxes, and casualty losses. Line 2 If you checked “Yes” and rented the unit out for at least 15 days, you may not be able to deduct all your rental expenses. You can deduct all of the following expenses for the rental part on Schedule E. • Mortgage interest. • Real estate taxes. • Casualty losses. • Other rental expenses not related to your use of the unit as a home, such as advertising expenses and rental agents’ fees. If you rented out a dwelling unit that you also used for personal purposes during the year, you may not be able to deduct all the expenses for the rental part. “Dwelling unit” (unit) means a house, apartment, condominium, or similar property. If any income is left after deducting these expenses, you can deduct other expenses, including depreciation, up to the amount of remaining income. You can carry over to 2005 the amounts you cannot deduct. Line 1 For rental real estate property only, show all of the following. • The kind of property you rented (for example, townhouse). • The street address, city or town, and state. You do not have to give the ZIP code. • Your percentage of ownership in the property, if less than 100%. A day of personal use is any day, or part of a day, that the unit was used by: • You for personal purposes; • Any other person for personal purposes, if that person owns part of the unit (unless rented to that person under a “shared equity” financing agreement); • Anyone in your family (or in the family of someone else who owns part of the unit), unless the unit is rented at a fair rental price to that person as his or her main home; • Anyone who pays less than a fair rental price for the unit; or • Anyone under an agreement that lets you use some other unit. Do not count as personal use: • Any day you spent working substantially full time repairing and maintaining the unit, even if family members used it for recreational purposes on that day, or See Pub. 527 for details. Line 3 If you received rental income from real estate (including personal property leased with real estate) and you were not in the real estate business, report the income on line 3. Include income received for renting a room or other space. If you received services or property instead of money as rent, report the fair market value of what you received as rental income. Be sure to enter the total of all your rents in the “Totals” column even if you have only one property. If you provided significant services to the renter, such as maid service, report the rental activity on Schedule C or C-EZ, not on Schedule E. Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, or similar services. E-3 If you were in the real estate sales business, include on line 3 only the rent received from real estate (including personal property leased with real estate) you held for investment or speculation. Do not use Schedule E to report income and expenses from rentals of real estate held for sale to customers in the ordinary course of your real estate sales business. Instead, use Schedule C or C-EZ for these rentals. For more details on rental income, use TeleTax topic 414 (see page 8 of the Form 1040 instructions) or see Pub. 527. Rental income from farm production or crop shares. Report farm rental income and expenses on Form 4835 if: • You received rental income based on crops or livestock produced by the tenant, and • You did not manage or operate the farm to any great extent. Line 4 Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; and patents. Use a separate column (A, B, or C) for each royalty property. Be sure to enter the total of all your royalties in the “Totals” column even if you have only one source of royalties. If you received $10 or more in royalties during 2004, the payer should send you a Form 1099-MISC or similar statement by January 31, 2005, showing the amount you received. If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C or C-EZ. You may be able to treat amounts received as “royalties” for the transfer of a patent or amounts received on the disposal of coal and iron ore as the sale of a capital asset. For details, see Pub. 544. Enter on line 4 the gross amount of royalty income, even if state or local taxes were withheld from oil or gas payments you received. Include taxes withheld by the producer on line 16. General Instructions for Lines 5 Through 21 Enter your rental and royalty expenses for each property in the appropriate column. You can deduct all ordinary and necessary expenses, such as taxes, interest, repairs, insurance, management fees, agents’ commissions, and depreciation. Do not deduct the value of your own labor or amounts paid for capital investments or capital improvements. Enter your total expenses for mortgage interest (line 12), total expenses before depreciation expense or depletion (line 19), and depreciation expenses or depletion Page 4 of 6 of 2004 Instructions for Schedule E (Form 1040) 11:29 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. (line 20) in the “Totals” column even if you have only one property. Renting out part of your home. If you rent out only part of your home or other property, deduct the part of your expenses that applies to the rented part. Credit or deduction for access expenditures. You may be able to claim a tax credit for eligible expenditures paid or incurred in 2004 to provide access to your business for individuals with disabilities. See Form 8826 for details. You can also deduct up to $15,000 of qualified costs paid or incurred in 2004 to remove architectural or transportation barriers to individuals with disabilities and the elderly. You cannot take both the credit and the deduction for the same expenditures. See Pub. 535 for details. Line 6 You can deduct ordinary and necessary auto and travel expenses related to your rental activities, including 50% of meal expenses incurred while traveling away from home. You generally can either deduct your actual expenses or take the standard mileage rate. You must use actual expenses if you used more than four vehicles simultaneously in your rental activities (as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle. You can use the standard mileage rate for 2004 only if: • You owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or • You leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before 1998). If you deduct actual auto expenses: • Include on line 6 the rental activity portion of the cost of gasoline, oil, repairs, insurance, tires, etc., and • Show auto rental or lease payments on line 18 and depreciation on line 20. If you take the standard mileage rate, multiply the number of miles you drove your auto in connection with your rental activities by 37.5 cents. Include this amount and your parking fees and tolls on line 6. If you claim any auto expenses (actual or the standard mileage rate), you must complete Part V of Form 4562 and attach Form 4562 to your tax return. See Pub. 527 and Pub. 463 for details. Line 10 Include on line 10 fees for tax advice and the preparation of tax forms related to your rental real estate or royalty properties. Do not deduct legal fees paid or incurred to defend or protect title to property, to recover property, or to develop or improve property. Instead, you must capitalize these fees and add them to the property’s basis. Lines 12 and 13 In general, to determine the interest expense allocable to your rental activities, you must have records to show how the proceeds of each debt were used. Specific tracing rules apply for allocating debt proceeds and repayment. See Pub. 535 for details. If you have a mortgage on your rental property, enter on line 12 the amount of interest you paid for 2004 to banks or other financial institutions. Be sure to fill in the “Totals” column. Do not deduct prepaid interest when you paid it. You can deduct it only in the year to which it is properly allocable. Points, including loan origination fees, charged only for the use of money must be deducted over the life of the loan. If you paid $600 or more in interest on a mortgage during 2004, the recipient should send you a Form 1098 or similar statement by January 31, 2005, showing the total interest received from you. If you paid more mortgage interest than is shown on your Form 1098 or similar statement, see Pub. 535 to find out if you can deduct part or all of the additional interest. If you can, enter the entire deductible amount on line 12. Attach a statement to your return explaining the difference. Write “See attached” in the left margin next to line 12. Note. If the recipient was not a financial institution or you did not receive a Form 1098 from the recipient, report your deductible mortgage interest on line 13. If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage, and the other person received Form 1098, report your share of the deductible interest on line 13. Attach a statement to your return showing the name and address of the person who received Form 1098. In the left margin next to line 13, write “See attached.” Line 14 You can deduct the cost of repairs made to keep your property in good working condition. Repairs generally do not add significant value to the property or extend its life. Examples of repairs are fixing a broken lock or painting a room. Improvements that increase the value of the property or extend its life, such as replacing a roof or renovating a kitchen, must be capitalized and depreciated (that is, they cannot be deducted in full in the year they are paid or incurred). See the instructions for line 20. E-4 Line 17 You can deduct the cost of ordinary and necessary telephone calls related to your rental activities or royalty income (for example, calls to the renter). However, the base rate (including taxes and other charges) for local telephone service for the first telephone line into your residence is a personal expense and is not deductible. Line 20 Depreciation is the annual deduction you must take to recover the cost or other basis of business or investment property having a useful life substantially beyond the tax year. Land is not depreciable. Depreciation starts when you first use the property in your business or for the production of income. It ends when you deduct all your depreciable cost or other basis or no longer use the property in your business or for the production of income. See the Instructions for Form 4562 to figure the amount of depreciation to enter on line 20. Be sure to fill in the “Totals” column. You must complete and attach Form 4562 only if you are claiming: • Depreciation on property first placed in service during 2004; • Depreciation on listed property (defined in the Instructions for Form 4562), including a vehicle, regardless of the date it was placed in service; or • A section 179 expense deduction or amortization of costs that began in 2004. See Pub. 527 for more information on depreciation of residential rental property. See Pub. 946 for a more comprehensive guide to depreciation. If you own mineral property or an oil, gas, or geothermal well, you may be able to take a deduction for depletion. See Pub. 535 for details. Line 22 If you have amounts for which you are not at risk, use Form 6198 to determine the amount of your deductible loss. Enter that amount in the appropriate column of Schedule E, line 22. In the space to the left of line 22, write “Form 6198.” Attach Form 6198 to your return. For details on the at-risk rules, see page E-1. Line 23 Do not complete line 23 if the amount on line 22 is from royalty properties. If you have a rental real estate loss from a passive activity (defined on page E-1), the amount of loss you can deduct may be limited by the passive activity loss rules. You may need to complete Form 8582 to figure the amount of loss, if any, to enter on line 23. Page 5 of 6 of 2004 Instructions for Schedule E (Form 1040) 11:29 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. If your rental real estate loss is not from a passive activity or you meet the exception for certain rental real estate activities (explained on page E-2), you do not have to complete Form 8582. Enter the loss from line 22 on line 23. Parts II and III If you need more space in Part II or III to list your income or losses, attach a continuation sheet using the same format as shown in Part II or III. However, be sure to complete the “Totals” columns for lines 29a and 29b, or lines 34a and 34b, as appropriate. If you also completed Part I on more than one Schedule E, use the same Schedule E on which you entered the combined totals in Part I. Tax preference items. If you are a partner, a shareholder in an S corporation, or a beneficiary of an estate or trust, you must take into account your share of preferences and adjustments from these entities for the alternative minimum tax on Form 6251 or Schedule I of Form 1041. Partners and S corporation shareholders should get a separate statement of income, expenses, deductions, and credits for each activity engaged in by the partnership and S corporation. If you are subject to the at-risk rules for any activity, use Form 6198 to figure the amount of any deductible loss. If the activity is nonpassive, enter any deductible loss from Form 6198 on the appropriate line in Part II, column (h), of Schedule E. • If you have a passive activity loss, you generally need to complete Form 8582 to figure the amount of the allowable loss to enter in Part II, column (f), for that activity. But if you are a general partner or an S corporation shareholder reporting your share of a partnership or an S corporation loss from a rental real estate activity and you meet all three of the conditions listed on page E-2 under Exception for Certain Rental Real Estate Activities, you do not have to complete Form 8582. Instead, enter your allowable loss in Part II, column (f). If you have passive activity income, complete Part II, column (g), for that activity. If you have nonpassive income or losses, complete Part II, columns (h) through (j), as appropriate. Partnerships Part II Income or Loss From Partnerships and S Corporations If you are a member of a partnership or joint venture or a shareholder in an S corporation, use Part II to report your share of the partnership or S corporation income (even if not received) or loss. You should receive a Schedule K-1 from the partnership or S corporation. You should also receive a copy of the Partner’s or Shareholder’s Instructions for Schedule K-1. Your copy of Schedule K-1 and its instructions will tell you where on your return to report your share of the items. If you did not receive these instructions with your Schedule K-1, see page 7 of the Form 1040 instructions for how to get a copy. Do not attach Schedules K-1 to your return. Keep them for your records. If you are treating items on your tax return differently from the way the partnership (other than an electing large partnership) or S corporation reported them on its return, you may have to file Form 8082. If you are a partner in an electing large partnership, you must report the items shown on Schedule K-1 (Form 1065-B) on your tax return the same way that the partnership reported the items on Schedule K-1. Special rules that limit losses. Please note the following. • If you have a current year loss, or a prior year unallowed loss, from a partnership or an S corporation, see At-Risk Rules and Passive Activity Loss Rules on page E-1. See the Schedule K-1 instructions before entering on your return other partnership items from a passive activity or income or loss from any publicly traded partnership. You can deduct unreimbursed ordinary and necessary expenses you paid on behalf of the partnership if you were required to pay these expenses under the partnership agreement. See the instructions for line 27 on page E-6 for how to report these expenses. Report allowable interest expense paid or incurred from debt-financed acquisitions in Part II or on Schedule A depending on the type of expenditure to which the interest is allocated. See Pub. 535 for details. If you claimed a credit for federal tax on gasoline or other fuels on your 2003 Form 1040 based on information received from the partnership, enter as income in column (g) or column (j), whichever applies, the amount of the credit claimed for 2003. Part or all of your share of partnership income or loss from the operation of the business may be considered net earnings from self-employment that must be reported on Schedule SE. Enter the amount from Schedule K-1 (Form 1065), box 14, code A (or from Schedule K-1 (Form 1065-B), box 9 (code K1)), on Schedule SE, after you reduce this amount by any allowable expenses attributable to that income. Foreign partnerships. If you are a U.S. person, you may have to file Form 8865 if any of the following applies. 1. You controlled a foreign partnership (that is, you owned more than a 50% direct or indirect interest in the partnership). E-5 2. You owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership. 3. You had an acquisition, disposition, or change in proportional interest of a foreign partnership that: a. Increased your direct interest to at least 10% or reduced your direct interest of at least 10% to less than 10%, or b. Changed your direct interest by at least a 10% interest. 4. You contributed property to a foreign partnership in exchange for a partnership interest if: a. Immediately after the contribution, you owned, directly or indirectly, at least a 10% interest in the partnership, or b. The fair market value of the property you contributed to the partnership in exchange for a partnership interest, when added to other contributions of property you made to the partnership during the preceding 12-month period, exceeds $100,000. Also, you may have to file Form 8865 to report certain dispositions by a foreign partnership of property you previously contributed to that partnership if you were a partner at the time of the disposition. For more details, including penalties for failing to file Form 8865, see Form 8865 and its separate instructions. S Corporations If you are a shareholder in an S corporation, your share of the corporation’s aggregate losses and deductions (combined income, losses, and deductions) is limited to the adjusted basis of your corporate stock and any debt the corporation owes you. Any loss or deduction not allowed this year because of the basis limitation can be carried forward and deducted in a later year subject to the basis limitation for that year. If you are claiming a deduction for your share of an aggregate loss, attach to your return a computation of the adjusted basis of your corporate stock and of any debt the corporation owes you. See the Schedule K-1 instructions for details. After applying the basis limitation, the deductible amount of your aggregate losses and deductions may be further reduced by the at-risk rules and the passive activity loss rules. See page E-1. Distributions of prior year accumulated earnings and profits of S corporations are dividends and are reported on Form 1040, line 9a. Interest expense relating to the acquisition of shares in an S corporation may be fully deductible on Schedule E. For details, see Pub. 535. Your share of the net income of an S corporation is not subject to self-employment tax. Page 6 of 6 of 2004 Instructions for Schedule E (Form 1040) 11:29 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Line 27 If you answered “Yes” on line 27, follow the instructions below. If you fail to follow these instructions, the IRS may send you a notice of additional tax due because the amounts reported by the partnership or S corporation on Schedule K-1 do not match the amounts you reported on your tax return. Losses Not Allowed in Prior Years Due to the At-Risk or Basis Limitations • Enter your total prior year unallowed losses that are now deductible on a separate line in column (h) of line 28. Do not combine these losses with, or net them against, any current year amounts from the partnership or S corporation. • Enter “PYA” (prior year amount) in column (a) of the same line. Prior Year Unallowed Losses From a Passive Activity Not Reported on Form 8582 • Enter on a separate line in column (f) of line 28 your total prior year unallowed losses not reported on Form 8582. Such losses include prior year unallowed losses that are now deductible because you did not have an overall loss from all passive activities or you disposed of your entire interest in a passive activity in a fully taxable transaction. Do not combine these losses with, or net them against, any current year amounts from the partnership or S corporation. • Enter “PYA” (prior year amount) in column (a) of the same line. Unreimbursed Partnership Expenses • You can deduct unreimbursed ordi- nary and necessary partnership expenses you paid on behalf of the partnership on Schedule E if you were required to pay these expenses under the partnership agreement (except amounts deductible only as itemized deductions, which you must enter on Schedule A). • Enter unreimbursed partnership expenses from nonpassive activities on a separate line in column (h) of line 28. Do not combine these expenses with, or net them against, any other amounts from the partnership. • If the expenses are from a passive activity and you are not required to file Form 8582, enter the expenses related to a passive activity on a separate line in column (f) of line 28. Do not combine these expenses with, or net them against, any other amounts from the partnership. • Enter “UPE” (unreimbursed partnership expenses) in column (a) of the same line. Line 28 8582), enter in the applicable column of line 28 your current year ordinary income or loss from the partnership or S corporation. Report each related item in the applicable column of a separate line following the line on which you reported the current year ordinary income or loss. Also enter a description of the related item (for example, depletion) in column (a) of the same line. If you are required to file Form 8582, see the Instructions for Form 8582 before completing Schedule E. If you are treating REMIC items on your tax return differently from the way the REMIC reported them on its return, you may have to file Form 8082. If you are the holder of a residual interest in more than one REMIC, attach a continuation sheet using the same format as in Part IV. Enter the totals of columns (d) and (e) on line 39 of Schedule E. If you also completed Part I on more than one Schedule E, use the same Schedule E on which you entered the combined totals in Part I. REMIC income or loss is not income or loss from a passive activity. Part III Note. If you are the holder of a regular interest in a REMIC, do not use Schedule E to report the income you received. Instead, report it on Form 1040, line 8a. Income or Loss From Estates and Trusts If you are a beneficiary of an estate or trust, use Part III to report your part of the income (even if not received) or loss. You should receive a Schedule K-1 (Form 1041) from the fiduciary. Your copy of Schedule K-1 and its instructions will tell you where on your return to report the items from Schedule K-1. Do not attach Schedule K-1 to your return. Keep it for your records. If you are treating items on your tax return differently from the way the estate or trust reported them on its return, you may have to file Form 8082. If you have estimated taxes credited to you from a trust (Schedule K-1, line 14a), write “ES payment claimed” and the amount on the dotted line next to line 37. Do not include this amount in the total on line 37. Instead, enter the amount on Form 1040, line 64. A U.S. person who transferred property to a foreign trust may have to report the income received by the trust as a result of the transferred property if, during 2004, the trust had a U.S. beneficiary. See section 679. An individual who received a distribution from, or who was the grantor of or transferor to, a foreign trust must also complete Part III of Schedule B (Form 1040) and may have to file Form 3520. In addition, the owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A. Column (c). Report the total of the amounts shown on Schedule(s) Q, line 2c. This is the smallest amount you are allowed to report as your taxable income (Form 1040, line 42). It is also the smallest amount you are allowed to report as your alternative minimum taxable income (AMTI) (Form 6251, line 28). If the amount in column (c) is larger than your taxable income would otherwise be, enter the amount from column (c) on Form 1040, line 42. Similarly, if the amount in column (c) is larger than your AMTI would otherwise be, enter the amount from column (c) on Form 6251, line 28. Write “Sch. Q” on the dotted line to the left of this amount on Form 1040 or 6251. Note. These rules also apply to estates and trusts that hold a residual interest in a REMIC. Be sure to make the appropriate entries on the comparable lines on Form 1041. Do not include the amount shown in column (c) in the total on line 39 of Schedule E. Column (e). Report the total of the amounts shown on Schedule(s) Q, line 3b. If you itemize your deductions on Schedule A, include this amount on line 22. Part V Summary Part IV Income or Loss From Real Estate Mortgage Investment Conduits (REMICs) If you are the holder of a residual interest in a REMIC, use Part IV to report your total share of the REMIC’s taxable income or loss for each quarter included in your tax year. You should receive Schedule Q (Form 1066) and instructions from the REMIC for each quarter. Do not attach Schedules Q to your return. Keep them for your records. For nonpassive income or loss (and passive losses for which you are not filing Form E-6 Line 42 You will not be charged a penalty for underpayment of estimated tax if: 1. Your gross farming or fishing income for 2003 or 2004 is at least two-thirds of your gross income, and 2. You file your 2004 tax return and pay the tax due by March 1, 2005. PAGER/SGML Userid: ________ Fileid: I1040SF.XML Leading adjust: -7/-7/-7% (28-Oct-2004) ❏ Draft (Init. & date) ❏ Ok to Print Filename: D:\USERS\xm9cb\documents\documents\Epicfiles\2004\04I1040SchF_d2.XML Page 1 of 6 of 2004 Instructions for Schedule F 16:55 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule F Use Schedule F (Form 1040) to report farm income and expenses. File it with Form 1040, 1041, 1065, or 1065-B. Profit or Loss This activity may subject you to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more informaFrom Farming tion. Additional information. Pub. 225 has samples of filled-in forms and schedules, and lists important dates that apply to farmers. Section references are to the Internal Revenue Code unless otherwise noted. What’s New • For certain business start-up costs paid or incurred after October 22, 2004, you can elect to deduct up to $5,000. This limit is reduced by the amount by which your start-up costs exceed $50,000. Also, the amortization period for certain business start-up costs paid or incurred after October 22, 2004, has been increased to 15 years. For details, see Pub. 225. • You can elect to deduct certain forestation and reforestation costs paid or incurred after October 22, 2004, instead of amortizing them over 84 months. This election does not apply to estates and trusts. Also, the dollar limitation for amortization on certain forestation and reforestation costs paid or incurred after October 22, 2004, has been eliminated. For details, see Pub. 225. General Instructions Other Schedules and Forms You May Have To File • Schedule E, Part I, to report rental in- come from pastureland that is based on a flat charge. Report on Schedule F, line 10, pasture income received from taking care of someone else’s livestock. • Schedule J to figure your tax by averaging your farm income over the previous 3 years. Doing so may reduce your tax. • Schedule SE to pay self-employment tax on income from your farming business. • Form 4562 to claim depreciation on assets placed in service in 2004, to claim amortization that began in 2004, to make an election under section 179 to expense certain property, or to report information on vehicles and other listed property. • Form 4684 to report a casualty or theft gain or loss involving farm business property including livestock held for draft, breeding, sport, or dairy purposes. See Pub. 225 for more information on how to report various farm losses, such as losses due to death of livestock or damage to crops or other farm property. • Form 4797 to report sales, exchanges, or involuntary conversions (other than from a casualty or theft) of certain farm property. Also use this form to report sales of livestock held for draft, breeding, sport, or dairy purposes. • Form 4835 to report rental income based on farm production or crop shares if you did not materially participate (for self-employment tax purposes) in the management or operation of the farm. This income is not subject to self-employment tax. See Pub. 225. • Form 8824 to report like-kind exchanges. Heavy highway vehicle use tax. If you use certain highway trucks, truck-trailers, tractor-trailers, or buses in your farming business, you may have to pay a federal highway motor vehicle use tax. See the Instructions for Form 2290 to find out if you owe this tax. Information returns. You may have to file information returns for wages paid to employees, certain payments of fees and other nonemployee compensation, interest, rents, royalties, annuities, and pensions. You may also have to file an information return if you sold $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other similar basis for resale. For details, see the 2004 General Instructions for Forms 1099, 1098, 5498, and W-2G. If you received cash of more than $10,000 in one or more related transactions in your farming business, you may have to file Form 8300. For details, see Pub. 1544. Reportable transaction disclosure statement. If you entered into a reportable transaction in 2004, you must use Form 8886 to disclose information if your federal income tax liability is affected by your participation in the transaction. You may have to pay a penalty if you are required to file Form 8886 but do not do so. For more information, see Reportable Transaction F-1 Cat. No. 17152R Disclosure Statement in the Instructions for Schedule C on page C-1. Estimated Tax If you had to make estimated tax payments in 2004 and you underpaid your estimated tax, you will not be charged a penalty if both of the following apply. • Your gross farming or fishing income for 2003 or 2004 is at least two-thirds of your gross income. • You file your 2004 tax return and pay the tax due by March 1, 2005. For details, see Pub. 225. Specific Instructions Filers of Forms 1041, 1065, and 1065-B Do not complete the block labeled “Social security number (SSN).” Instead, enter your employer identification number (EIN) on line D. Line B On line B, enter one of the 14 principal agricultural activity codes listed in Part IV on page 2 of Schedule F. Select the code that best describes the source of most of your income. Line C If you use the cash method, check the box labeled “Cash.” Complete Schedule F, Parts I and II. Generally, report income in the year in which you actually or constructively received it and deduct expenses in the year you paid them. However, if the payment of an expenditure creates an asset having a useful life that extends substantially beyond the close of the year, it may not be deductible or may be deductible only in part for the year of the payment. See Pub. 225. If you use the accrual method, check the box labeled “Accrual.” Complete Schedule F, Parts II, III, and line 11. Generally, re- Page 2 of 6 of 2004 Instructions for Schedule F 16:55 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. port income in the year in which you earned it and deduct expenses in the year you incurred them, even if you did not pay them in that year. Accrual basis taxpayers are put on a cash basis for deducting business expenses owed to a related cash-basis taxpayer. Other rules determine the timing of deductions based on economic performance. See Pub. 538. Farming syndicates cannot use the cash method of accounting. A farming syndicate may be a partnership, any other noncorporate group, or an S corporation if: • The interests in the business have ever been for sale in a way that would require registration with any federal or state agency or • More than 35% of the loss during any tax year is shared by limited partners or limited entrepreneurs. A limited partner is one who can lose only the amount invested or required to be invested in the partnership. A limited entrepreneur is a person who does not take any active part in managing the business. Line D You need an employer identification number (EIN) only if you had a qualified retirement plan or were required to file an employment, excise, estate, trust, partnership, or alcohol, tobacco, and firearms tax return. If you need an EIN, see the Instructions for Form SS-4. If you do not have an EIN, leave line D blank. Do not enter your SSN. Line E Material participation. For the definition of material participation for purposes of the passive activity rules, see the instructions for Schedule C, line G, on page C-2. If you meet any of the material participation tests described in those instructions, check the “Yes” box. If you are a retired or disabled farmer, you are treated as materially participating in a farming business if you materially participated 5 of the 8 years preceding your retirement or disability. Also, a surviving spouse is treated as materially participating in a farming activity if the real property used for farming meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and the surviving spouse actively manages the farm. Check the “No” box if you did not materially participate. If you checked “No” and you have a loss from this business, see Limit on passive losses below. If you have a profit from this business activity but have current year losses from other passive activities or prior year unallowed passive activity losses, see the Instructions for Form 8582. Limit on passive losses. If you checked the “No” box and you have a loss from this business, you may have to use Form 8582 to figure your allowable loss, if any, to enter on Schedule F, line 36. Generally, you can deduct losses from passive activi- ties only to the extent of income from passive activities. For details, see Pub. 925. Part I. Farm Income— Cash Method In Part I, show income received for items listed on lines 1 through 10. Generally, count both the cash actually or constructively received and the fair market value of goods or other property received for these items. Income is constructively received when it is credited to your account or set aside for you to use. However, direct payments or counter-cyclical payments received under the Farm Security and Rural Investment Act of 2002 are required to be included in income only in the year of actual receipt. If you ran the farm yourself and received rents based on crop shares or farm production, report these rents as income on line 4. Sales of Livestock Because of WeatherRelated Conditions If you sold livestock because of drought, flood, or other weather-related conditions, you can elect to report the income from the sale in the year after the year of sale if all of the following apply. • Your main business is farming. • You can show that you sold the livestock only because of weather-related conditions. • Your area qualified for federal aid. See Pub. 225 for details. Forms 1099 or CCC-1099-G If you received Forms 1099 or CCC-1099-G showing amounts paid to you, first determine if the amounts are to be included with farm income. Then, use the following chart to determine where to report the income on Schedule F. Include the Form 1099 or CCC-1099-G amounts in the total amount reported on that line. Where to report Form 1099-PATR . . . . . . . . . . 1099-A . . . . . . . . . . . . . 1099-MISC (for crop insurance) . . 1099-G or CCC-1099-G (for disaster payments) (for other agricultural program payments) . . . F-2 .. .. Line 5a Line 7b .. Line 8a .. Line 8a .. Line 6a You may also receive Form 1099-MISC for other types of income. In this case, report it on whichever line best describes the income. For example, if you received a Form 1099-MISC for custom farming work, include this amount on line 9, “Custom hire (machine work) income.” Lines 5a and 5b If you received distributions from a cooperative in 2004, you should receive Form 1099-PATR. On line 5a, show your total distributions from cooperatives. This includes patronage dividends, nonpatronage distributions, per-unit retain allocations, and redemption of nonqualified notices and per-unit retain allocations. Show patronage dividends received in cash and the dollar amount of qualified written notices of allocation. If you received property as patronage dividends, report the fair market value of the property as income. Include cash advances received from a marketing cooperative. If you received per-unit retains in cash, show the amount of cash. If you received qualified per-unit retain certificates, show the stated dollar amount of the certificates. Do not include as income on line 5b patronage dividends from buying personal or family items, capital assets, or depreciable assets. Enter these amounts on line 5a only. If you do not report patronage dividends from these items as income, you must subtract the amount of the dividend from the cost or other basis of these items. Lines 6a and 6b Enter on line 6a the total of the following amounts. • Direct payments. • Counter-cyclical payments. • Price support payments. • Market gain from the repayment of a secured Commodity Credit Corporation (CCC) loan for less than the original loan amount. • Diversion payments. • Cost-share payments (sight drafts). • Payments in the form of materials (such as fertilizer or lime) or services (such as grading or building dams). These amounts are government payments you received, usually reported to you on Form 1099-G. You may also receive Form CCC-1099-G from the Department of Agriculture showing the amounts and types of payments made to you. On line 6b, report only the taxable amount. For example, do not report the market gain shown on Form CCC-1099-G on line 6b if you elected to report CCC loan proceeds as income in the year received (see Lines 7a Through 7c on page F-3). No Page 3 of 6 of 2004 Instructions for Schedule F 16:55 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. gain results from redemption of the commodity because you previously reported the CCC loan proceeds as income. You are treated as repurchasing the commodity for the amount of the loan repayment. However, if you did not report the CCC loan proceeds under the election, you must report the market gain on line 6b. Lines 7a Through 7c Commodity Credit Corporation (CCC) loans. Generally, you do not report CCC loan proceeds as income. However, if you pledge part or all of your production to secure a CCC loan, you may elect to report the loan proceeds as income in the year you receive them, instead of the year you sell the crop. If you make this election (or made the election in a prior year), report loan proceeds you received in 2004 on line 7a. Attach a statement to your return showing the details of the loan(s). Forfeited CCC loans. Include the full amount forfeited on line 7b, even if you reported the loan proceeds as income. If you did not elect to report the loan proceeds as income, also include the forfeited amount on line 7c. If you did elect to report the loan proceeds as income, you generally will not have an entry on line 7c. But if the amount forfeited is different from your basis in the commodity, you may have an entry on line 7c. See Pub. 225 for details on the tax consequences of electing to report CCC loan proceeds as income or forfeiting CCC loans. Lines 8a Through 8d In general, you must report crop insurance proceeds in the year you receive them. Federal crop disaster payments are treated as crop insurance proceeds. However, if 2004 was the year of damage, you can elect to include certain proceeds in income for 2005. To make this election, check the box on line 8c and attach a statement to your return. See Pub. 225 for a description of the proceeds for which an election can be made and for what you must include in your statement. Generally, if you elect to defer any eligible crop insurance proceeds, you must defer all such crop insurance proceeds (including federal disaster payments). Enter on line 8a the total crop insurance proceeds you received in 2004, even if you elect to include them in income for 2005. Enter on line 8b the taxable amount of the proceeds you received in 2004. Do not include proceeds you elect to include in income for 2005. Enter on line 8d the amount, if any, of crop insurance proceeds you received in 2003 and elected to include in income for 2004. Line 10 Use this line to report income not shown on lines 1 through 9, such as the following. • Illegal federal irrigation subsidies. See Pub. 225. • Bartering income. • Income from cancellation of debt. Generally, if a debt is canceled or forgiven, you must include the canceled amount in income. If a federal agency, financial institution, or credit union canceled or forgave a debt you owed of $600 or more, it should send you a Form 1099-C, or similar statement, by January 31, 2005, showing the amount of debt canceled in 2004. However, certain solvent farmers can exclude canceled qualified farm indebtedness from income. To find out if you must include any cancellation of debt in income, see Pub. 225. • State gasoline or fuel tax refund you received in 2004. • The amount of credit for federal tax paid on fuels claimed on your 2003 Form 1040. • The amount of credit for alcohol used as fuel that was entered on Form 6478. • Any recapture of excess depreciation, including any section 179 expense deduction, if the business use percentage of any listed property decreased to 50% or less in 2004. Use Form 4797 to figure the recapture. See the instructions for Schedule C, line 13, on page C-4 for the definition of listed property. • The inclusion amount on leased listed property (other than vehicles) when the business use percentage drops to 50% or less. See Pub. 946 to figure the amount. • Any recapture of the deduction for clean-fuel vehicles used in your farming business and clean-fuel vehicle refueling property. For details on how to figure recapture, see Pub. 535. • The gain or loss on the sale of commodity futures contracts if the contracts were made to protect you from price changes. These are a form of business insurance and are considered hedges. If you had a loss in a closed futures contract, enclose it in parentheses. For property acquired and hedging positions established, you must clearly identify on your books and records both the hedging transaction and the item(s) or aggregate risk that is being hedged. Purchase or sales contracts are not true hedges if they offset losses that already occurred. If you bought or sold commodity futures with the hope of making a profit due to favorable price changes, report the profit or loss on Form 6781 instead of this line. F-3 Part II. Farm Expenses Do not deduct the following. • Personal or living expenses (such as taxes, insurance, or repairs on your home) that do not produce farm income. • Expenses of raising anything you or your family used. • The value of animals you raised that died. • Inventory losses. • Personal losses. If you were repaid for any part of an expense, you must subtract the amount you were repaid from the deduction. Capitalizing costs of property. If you produced real or tangible personal property or acquired property for resale, certain expenses must be included in inventory costs or capitalized. These expenses include the direct costs of the property and the share of any indirect costs allocable to that property. However, these rules generally do not apply to expenses of: 1. Producing any plant that has a preproductive period of 2 years or less, 2. Raising animals, or 3. Replanting certain crops if they were lost or damaged by reason of freezing temperatures, disease, drought, pests, or casualty. Exceptions 1 and 2 above do not apply to tax shelters, farming syndicates, or partnerships required to use the accrual method of accounting under section 447 or 448. But you may be able to currently deduct rather than capitalize the expenses of producing a plant with a preproductive period of more than 2 years. See Election to deduct certain preproductive period expenses below. Do not reduce your deductions on lines 12 through 34e by the preproductive period expenses you must capitalize. Instead, enter the total amount capitalized in parentheses on line 34f. See Preproductive period expenses on page F-6 for details. If you revoked an election made before 1989 to deduct preproductive period expenses for animals, you must continue to apply the alternative depreciation rules to property placed in service while your election was in effect. Also, the expenses you previously chose to deduct will have to be recaptured as ordinary income when you dispose of the animals. Election to deduct certain preproductive period expenses. If the preproductive pe- riod of any plant you produce is more than 2 years, you can elect to currently deduct the expenses rather than capitalize them. Page 4 of 6 of 2004 Instructions for Schedule F 16:55 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. But you cannot make this election for the costs of planting or growing citrus or almond groves that are incurred before the end of the 4th tax year beginning with the tax year you planted them in their permanent grove. By deducting the preproductive period expenses for which you can make this election, you are treated as having made the election. In the case of a partnership or S corporation, the election must be made by the partner or shareholder. This election cannot be made by tax shelters, farming syndicates, or partners in partnerships required to use the accrual method of accounting under section 447 or 448. If you make the election to deduct preproductive expenses for plants, any gain you realize when disposing of the plants is ordinary income up to the amount of the preproductive expenses you deducted. Also, the alternative depreciation rules apply to property placed in service in any tax year your election is in effect. Unless you obtain IRS consent, you must make this election for the first tax year in which you engage in a farming business involving the production of property subject to the capitalization rules. You cannot revoke this election without IRS consent. ously used the standard mileage rate for that vehicle. You can take the standard mileage rate for 2004 only if you: • Owned the vehicle and use the standard mileage rate for the first year you placed the vehicle in service or • Leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before 1998). If you deduct actual expenses: • Include on line 12 the business portion of expenses for gasoline, oil, repairs, insurance, tires, license plates, etc., and • Show depreciation on line 16 and rent or lease payments on line 26a. If you take the standard mileage rate, multiply the number of business miles by 37.5 cents. Add to this amount your parking fees and tolls, and enter the total on line 12. Do not deduct depreciation, rent or lease payments, or your actual operating expenses. If you claim any car or truck expenses (actual or the standard mileage rate), you must provide the information requested on Form 4562, Part V. Be sure to attach Form 4562 to your return. For details, see Pub. 463. For details, see Pub. 225. Prepaid farm supplies. Generally, if you use the cash method of accounting and your prepaid farm supplies are more than 50% of your other deductible farm expenses, your deduction for those supplies may be limited. Prepaid farm supplies include expenses for feed, seed, fertilizer, and similar farm supplies not used or consumed during the year. They also include the cost of poultry that would be allowable as a deduction in a later tax year if you were to (a) capitalize the cost of poultry bought for use in your farming business and deduct it ratably over the lesser of 12 months or the useful life of the poultry and (b) deduct the cost of poultry bought for resale in the year you sell or otherwise dispose of it. If the limit applies, you can deduct prepaid farm supplies that do not exceed 50% of your other deductible farm expenses in the year of payment. You can deduct the excess only in the year you use or consume the supplies (other than poultry, which is deductible as explained above). For details and exceptions to these rules, see Pub. 225. Line 12 You can deduct the actual expenses of running your car or truck or take the standard mileage rate. You must use actual expenses if you used your vehicle for hire or you used more than four vehicles simultaneously in your farming business (such as in fleet operations). You cannot use actual expenses for a leased vehicle if you previ- Line 14 Deductible soil and water conservation expenses generally are those that are paid to conserve soil and water or to prevent erosion of land used for farming. These expenses include (but are not limited to) the cost of leveling, grading and terracing, contour furrowing, the construction, control, and protection of diversion channels, drainage ditches, earthen dams, watercourses, outlets and ponds, the eradication of brush, and the planting of windbreaks. These expenses can be deducted only if they are consistent with a conservation plan approved by the Natural Resources Conservation Service of the Department of Agriculture for the area in which your land is located. If no plan exists, the expenses must be consistent with a plan of a comparable state agency. You cannot deduct the expenses if they were paid or incurred for land used in farming in a foreign country. Do not deduct expenses you paid or incurred to drain or fill wetlands, to prepare land for center pivot irrigation systems, or to clear land. Your deduction cannot exceed 25% of your gross income from farming (excluding certain gains from selling assets such as farm machinery and land). If your conservation expenses are more than the limit, the excess can be carried forward and deducted in later tax years. However, the amount deductible for any 1 year cannot exceed the 25% gross income limit for that year. F-4 For details, see Pub. 225. Line 15 Enter amounts paid for custom hire or machine work (the machine operator furnished the equipment). Do not include amounts paid for rental or lease of equipment that you operated yourself. Instead, report those amounts on line 26a. Line 16 You can deduct depreciation of buildings, improvements, cars and trucks, machinery, and other farm equipment of a permanent nature. Do not deduct depreciation on your home, furniture or other personal items, land, livestock you bought or raised for resale, or other property in your inventory. You can also elect under section 179 to expense a portion of the cost of certain property you bought in 2004 for use in your farming business. For details, including when you must complete and attach Form 4562, see the instructions for Schedule C, line 13, on page C-4. Line 17 Deduct contributions to employee benefit programs that are not an incidental part of a pension or profit-sharing plan included on line 25. Examples are accident and health plans, group-term life insurance, and dependent care assistance programs. If you made contributions on your behalf as a self-employed person to a dependent care assistance program, complete Form 2441, Parts I and III, to figure your deductible contributions to that program. Do not include on line 17 any contributions you made on your behalf as a self-employed person to an accident and health plan or for group-term life insurance. You may be able to deduct on Form 1040, line 31, the amount you paid for health insurance on behalf of yourself, your spouse, and dependents even if you do not itemize your deductions. See the instructions for Form 1040, line 31, for details. Line 18 If you use the cash method, you cannot deduct when paid the cost of feed your livestock will consume in a later year unless all of the following apply. • The payment was for the purchase of feed rather than a deposit. • The prepayment had a business purpose and was not made merely to avoid tax. Page 5 of 6 of 2004 Instructions for Schedule F 16:55 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. • Deducting the prepayment will not materially distort your income. If all of the above apply, you can deduct the prepaid feed, which is subject to the overall limit for Prepaid farm supplies explained on page F-4. If all of the above do not apply, you can deduct the prepaid feed only in the year it is consumed. Line 20 Do not include the cost of transportation incurred in purchasing livestock held for resale as freight paid. Instead, add these costs to the cost of the livestock, and deduct them when the livestock is sold. Line 22 Deduct on this line premiums paid for farm business insurance. Deduct on line 17 amounts paid for employee accident and health insurance. Amounts credited to a reserve for self-insurance or premiums paid for a policy that pays for your lost earnings due to sickness or disability are not deductible. Lines 23a and 23b Interest allocation rules. The tax treatment of interest expense differs depending on its type. For example, home mortgage interest and investment interest are treated differently. “Interest allocation” rules require you to allocate (classify) your interest expense so it is deducted on the correct line of your return and receives the right tax treatment. These rules could affect how much interest you are allowed to deduct on Schedule F. Generally, you allocate interest expense by tracing how the proceeds of the loan are used. See Pub. 535 for details. If you paid interest on a debt secured by your main home and any of the proceeds from that debt were used in your farming business, see Pub. 535 to figure the amount to include on lines 23a and 23b. How to report. If you have a mortgage on real property used in your farming business (other than your main home), enter on line 23a the interest you paid for 2004 to banks or other financial institutions for which you received a Form 1098 (or similar statements). If you did not receive a Form 1098, enter the interest on line 23b. If you paid more mortgage interest than is shown on Form 1098, see Pub. 535 to find out if you can deduct the additional interest. If you can, include the amount on line 23a. Attach a statement to your return explaining the difference and enter “See attached” in the margin next to line 23a. If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage and the other person received the Form 1098, include your share of the interest on line 23b. Attach a statement to your return showing the name and address of the person who received the Form 1098. In the margin next to line 23b, enter “See attached.” Do not deduct interest you prepaid in 2004 for later years; include only the part that applies to 2004. Line 24 Enter the amounts you paid for farm labor. Do not include amounts paid to yourself. Reduce your deduction by the amounts claimed on: • Form 5884, Work Opportunity Credit, line 2; • Form 8844, Empowerment Zone and Renewal Community Employment Credit, line 2; • Form 8845, Indian Employment Credit, line 4; • Form 8861, Welfare-to-Work Credit, line 2; and • Form 8884, New York Liberty Zone Business Employee Credit, line 2. Count the cost of boarding farm labor but not the value of any products they used from the farm. Count only what you paid household help to care for farm laborers. If you provided taxable fringe benefits to your employees, such as personal use of a car, do not include in farm labor the amounts you depreciated or deducted elsewhere. Line 25 Enter your deduction for contributions to employee pension, profit-sharing, or annuity plans. If the plan included you as a self-employed person, enter contributions made as an employer on your behalf on Form 1040, line 32, not on Schedule F. Generally, you must file the applicable form listed below if you maintain a pension, profit-sharing, or other funded-deferred compensation plan. The filing requirement is not affected by whether or not the plan qualified under the Internal Revenue Code, or whether or not you claim a deduction for the current tax year. There is a penalty for failure to timely file these forms. Form 5500. File this form for a plan that is not a one-participant plan (see below). Form 5500-EZ. File this form for a one-participant plan. A one-participant plan is a plan that only covers you (or you and your spouse). For details, see Pub. 560. F-5 Lines 26a and 26b If you rented or leased vehicles, machinery, or equipment, enter on line 26a the business portion of your rental cost. But if you leased a vehicle for a term of 30 days or more, you may have to reduce your deduction by an inclusion amount. See Pub. 463 to figure your inclusion amount. Enter on line 26b amounts paid to rent or lease other property such as pasture or farmland. Line 27 Enter amounts you paid for repairs and maintenance of farm buildings, machinery, and equipment. You can also include what you paid for tools of short life or minimal cost, such as shovels and rakes. Do not deduct repairs or maintenance on your home. Line 31 You can deduct the following taxes on this line. • Real estate and personal property taxes on farm business assets. • Social security and Medicare taxes you paid to match what you are required to withhold from farm employees’ wages and any federal unemployment tax paid. • Federal highway use tax. Do not deduct the following taxes on this line. • Federal income taxes, including your self-employment tax. However, you can deduct one-half of your self-employment tax on Form 1040, line 30. • Estate and gift taxes. • Taxes assessed for improvements, such as paving and sewers. • Taxes on your home or personal use property. • State and local sales taxes on property purchased for use in your farming business. Instead, treat these taxes as part of the cost of the property. • Other taxes not related to your farming business. Line 32 Enter amounts you paid for gas, electricity, water, etc., for business use on the farm. Do not include personal utilities. You cannot deduct the base rate (including taxes) of the first telephone line into your residence, even if you use it for your farming business. But you can deduct expenses you paid for your farming business that are more than the cost of the base rate for the first phone line. For example, if you had a second phone line, you can deduct the business Page 6 of 6 of 2004 Instructions for Schedule F 16:55 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. percentage of the charges for that line, including the base rate charges. Lines 34a Through 34f Include all ordinary and necessary farm expenses not deducted elsewhere on Schedule F, such as advertising, office supplies, etc. Do not include fines or penalties paid to a government for violating any law. At-risk loss deduction. Any loss from this activity that was not allowed as a deduction last year because of the at-risk rules is treated as a deduction allocable to this activity in 2004. Bad debts. See Pub. 535. Business start-up costs. You can elect to amortize certain business start-up costs paid or incurred before October 23, 2004, over 60 months or more beginning with the month your business began. For certain business start-up costs paid or incurred after October 22, 2004, you can elect to deduct up to $5,000 for the year your business began. This limit is reduced by the amount by which your start-up costs exceed $50,000. You can elect to amortize any remaining qualified business start-up costs over 15 years. For details, see Pub. 225. For amortization that begins in 2004, you must complete and attach Form 4562. Business use of your home. You may be able to deduct certain expenses for business use of your home, subject to limitations. Use the worksheet in Pub. 587 to figure your allowable deduction. Do not use Form 8829. Clean-fuel vehicles and clean-fuel vehicle refueling property. You may be able to de- duct part of the cost of qualified clean-fuel vehicle property used in your farming business and qualified clean-fuel vehicle refueling property. See Pub. 535. Forestation and reforestation costs. You can elect to amortize certain forestation and reforestation costs over 84 months. You can also elect to expense up to $10,000 ($5,000 if married filing separately) of certain forestation and reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. The amortization election does not apply to trusts and the expense election does not apply to estates and trusts. For details, see Pub. 225. For amortization that begins in 2004, you must complete and attach Form 4562. Legal and professional fees. You can deduct on this line fees for tax advice related to your farming business and for preparation of the tax forms related to your farming business. Travel, meals, and entertainment. Generally, you can deduct expenses for farm business travel and 50% of your business meals and entertainment. But there are exceptions and limitations. See the instructions for Schedule C, lines 24a through 24c, on page C-5. Preproductive period expenses. If you had preproductive period expenses in 2004 and you decided to capitalize them, you must enter the total of these expenses in parentheses on line 34f and enter “263A” in the space to the left of the total. Subtract the amount on line 34f from the total of lines 12 through 34e. Enter the result on line 35. For details, see Capitalizing costs of property on page F-3 and Pub. 225. Line 36 If you have a loss, the amount of loss you can deduct this year may be limited. Go on to line 37 before entering your loss on line 36. If you checked the “No” box on Schedule F, line E, also see the Instructions for Form 8582. Enter the net profit or deductible loss here and on Form 1040, line 18, and Schedule SE, line 1. Estates and trusts should enter the net profit or deductible loss here and on Form 1041, line 6. Partnerships should stop here and enter the profit or loss on this line and on Form 1065, line 5 (or Form 1065-B, line 7). If you have a net profit on line 36, this amount is earned income and may qualify you for the earned income credit if you meet certain conditions. See the instructions for Form 1040, lines 65a and 65b, for details. Line 37 At-risk rules. Generally, if you have a loss from a farming activity and amounts in the activity for which you are not at risk, you will have to complete Form 6198 to figure your allowable loss. The at-risk rules generally limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the activity. Check box 37b if you have amounts for which you are not at risk in this activity, such as the following. • Nonrecourse loans used to finance the activity, to acquire property used in the activity, or to acquire the activity that are not secured by your own property (other than property used in the activity). However, there is an exception for certain nonrecourse financing borrowed by you in connection with holding real property. • Cash, property, or borrowed amounts used in the activity (or contributed to the activity, or used to acquire the activity) that F-6 are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance and insurance against tort liability). • Amounts borrowed for use in the activity from a person who has an interest in the activity, other than as a creditor, or who is related under section 465(b)(3) to a person (other than you) having such an interest. If all amounts are at risk in this business, check box 37a and enter your loss on line 36. But if you checked the “No” box on line E, you may need to complete Form 8582 to figure your allowable loss to enter on line 36. See the Instructions for Form 8582. If you checked box 37b, see Form 6198 to determine the amount of your deductible loss and enter that amount on line 36. But if you checked the “No” box on line E, your loss may be further limited. See the Instructions for Form 8582. If your at-risk amount is zero or less, enter -0- on line 36. Be sure to attach Form 6198 to your return. If you checked box 37b and you do not attach Form 6198, the processing of your tax return may be delayed. Any loss from this activity not allowed for 2004 because of the at-risk rules is treated as a deduction allocable to the activity in 2005. For details, see Pub. 925 and the Instructions for Form 6198. Part III. Farm Income—Accrual Method If you use the accrual method, report farm income when you earn it, not when you receive it. Generally, you must include animals and crops in your inventory if you use this method. See Pub. 225 for exceptions, inventory methods, how to change methods of accounting, and for rules that require certain costs to be capitalized or included in inventory. Lines 39a Through 41c See the instructions for lines 5a through 7c that begin on page F-2. Line 44 See the instructions for line 10 on page F-3. PAGER/SGML Userid: ________ Fileid: I1040SJ.XML ❏ Draft (Init. & date) Leading adjust: 0/0/0/0% (28-Oct-2004) ❏ Ok to Print Filename: D:\USERS\xm9cb\documents\documents\Epicfiles\2004\04I1040SchJ_d2.XML Page 1 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule J Income Averaging for Farmers and Fishermen What’s New Fishermen. You can use Schedule J to av- erage your income from your fishing business by electing to include taxable income from fishing in elected farm income on line 2. Alternative minimum tax (AMT). Filing Schedule J may reduce your total tax for 2004 even if you owe AMT. General Instructions Prior Year Tax Returns You may need copies of your original or amended income tax returns for 2001, 2002, and 2003 to figure your tax on Schedule J. If you do not have copies of those returns, you can get them by filing Form 4506. There is a $39 fee for each return requested. If you want a free transcript of your tax return, use Form 4506 – T. See your Form 1040 instruction booklet to find out how to get these forms. Keep a copy of your 2004 income tax return for use in 2005, 2006, or 2007. Additional Information See Regulations section 1.1301-1 for more details. Specific Instructions Line 2 Elected Farm Income To figure elected farm income, first figure your taxable income from farming or fishing. This includes all income, gains, losses, and deductions attributable to any farming or fishing business. However, it does not include gain from the sale or other disposition of land. Use Schedule J (Form 1040) to elect to figure your 2004 tax by averaging, over the previous 3 years (base years), all or part of your 2004 taxable income from your trade or business of farming or fishing. Making this election may give you a lower tax if your 2004 income from farming or fishing is high and your taxable income for one or more of the 3 prior years was low. This election does not apply when figuring your tentative minimum tax on Form 6251 (that is, you cannot average your AMT income from farming or fishing). Also, you do not have to recompute, because of this election, the tax liability of any minor child who was required to use your tax rates in the prior years. Your elected farm income is the amount of your taxable income from farming or fishing that you elect to include on line 2. You do not have to include all of your taxable income from farming or fishing on line 2. It may be to your advantage to include less than the full amount, depending on how the amount you include on line 2 affects your tax bracket for the current and prior 3 tax years. Your elected farm income cannot exceed your taxable income. Also, the portion of your elected farm income treated as a net capital gain cannot exceed the smaller of your total net capital gain or your net capital gain attributable to your farming or fishing business. If your elected farm income includes net capital gain, you must allocate an equal portion of the net capital gain to each of the base years. If, for any base year, you had a capital loss that resulted in a capital loss carryover to the next tax year, do not reduce the elected farm income allocated to that base year by any part of the carryover. Farming business. A farming business is the trade or business of cultivating land or raising or harvesting any agricultural or horticultural commodity. This includes: 1. Operating a nursery or sod farm; 2. Raising or harvesting of trees bearing fruits, nuts, or other crops; 3. Raising ornamental trees (but not evergreen trees that are more than 6 years old when severed from the roots); 4. Raising, shearing, feeding, caring for, training, and managing animals; and 5. Leasing land to a tenant engaged in a farming business, but only if the lease payments are (a) based on a share of the tenant’s production (not a fixed amount), and (b) determined under a written agreement entered into before the tenant begins significant activities on the land. A farming business does not include: J-1 Cat. No. 25514J • Contract harvesting of an agricultural or horticultural commodity grown or raised by someone else, or • Merely buying or reselling plants or animals grown or raised by someone else. Fishing business. A fishing business is the trade or business of fishing in which the fish harvested, either in whole or in part, are intended to enter commerce or enter commerce through sale, barter, or trade. This includes: 1. The catching, taking, or harvesting of fish; 2. The attempted catching, taking, or harvesting of fish; 3. Any other activity which can reasonably be expected to result in the catching, taking, or harvesting of fish; or 4. Any operations at sea in support of, or in preparation for, any activity described in (1) through (3) above. The word fish means finfish, mollusks, crustaceans, and all other forms of marine animal and plant life other than marine mammals and birds. A fishing business does not include any scientific research activity which is conducted by a scientific research vessel. Generally, income, gains, losses, and deductions from farming or fishing are reported on: Form 1040, line 7, to the extent of wages and other compensation you received as a shareholder in an S corporation engaged in a farming or fishing business; Schedule C or C-EZ; Schedule D; Schedule E, Part II; Schedule F; Form 4797; and Form 4835. TIP • • • • • • • Page 2 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2001 Taxable Income Worksheet—Line 5 Keep for Your Records Complete this worksheet if you did not use Schedule J to figure your tax for both 2002 and 2003 and your 2001 taxable income was zero or less. See the instructions below before completing this worksheet. 1. Figure the taxable income from your 2001 tax return (or as previously adjusted) without limiting it to zero. If you had an NOL for 2001, do not include any NOL carryovers or carrybacks to 2001. Enter the result as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. If there is a loss on your 2001 Schedule D, line 18, add that loss (as a positive amount) and your 2001 capital loss carryover to 2002. Subtract from that sum the amount of the loss on your 2001 Schedule D, line 17, and enter the result . . . 2. 3. If you had an NOL for 2001, enter it as a positive amount. Otherwise, enter as a positive amount the portion, if any, of the NOL carryovers and carrybacks to 2001 that were not used in 2001 and were carried to years after 2001 . . . . . . . . . 3. 4. Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Subtract line 4 from line 1. Enter the result as a negative amount on Schedule J, line 5 . . . . . . . . . . Line 4 Figure the tax on the amount on line 3 using the 2004 Tax Table, Tax Computation Worksheet, or Qualified Dividends and Capital Gain Tax Worksheet from your 2004 Form 1040 instruction booklet, or use the Schedule D Tax Worksheet. Enter the tax on line 4. Line 5 If you used Schedule J to figure your tax for 2003 (that is, you entered the amount from that Schedule J, line 22, on Form 1040, line 41, or on Form 1040X), enter on line 5 the amount from your 2003 Schedule J, line 11. If you used Schedule J to figure your tax for 2002 but not 2003, enter on line 5 the amount from your 2002 Schedule J, line 15. If you used Schedule J to figure your tax for 2001 but not 2002 nor 2003, enter 1. 4. 5. on line 5 the amount from your 2001 Schedule J, line 3. Instructions for 2001 Taxable Income Worksheet If you figured your tax for 2001, 2002, and 2003 without using Schedule J, enter on line 5 the taxable income from your 2001 tax return (or as previously adjusted by the IRS, an amended return, etc.). But if that amount is zero or less, complete the worksheet above to figure the amount to enter on line 5. Line 2. Any net capital loss deduction on your 2001 Schedule D, line 18, is not allowed for income averaging purposes to the extent it did not reduce your capital loss carryover to 2002. This could happen if the taxable income before subtracting exemptions shown on your 2001 Form 1040, line 37 (or as previously adjusted), was less than zero. Enter the amount by which your 2001 capital loss carryover to 2002 (the sum of your short- and long-term capital loss carryovers) exceeds the excess of the loss on your 2001 Schedule D, line 17, over the loss on your 2001 Schedule D, line 18. If you had any net operating loss (NOL) carrybacks to 2001, be sure you refigured your 2001 capital loss carryover to 2002. If you filed your 2001 tax return using TeleFile, enter the taxable income from your TeleFile Tax Record. If you did not file a tax return for 2001, use the amount you would have reported as your taxable income had you been required to file a tax return. Be sure to keep all your records for 2001 for at least 3 years after April 15, 2005 (or the date you file your 2004 tax return, if later), even if you did not file a tax return for 2001. Line 3. If you had an NOL for 2001, enter the amount of that NOL as figured on the 2001 Form 1045, Schedule A, line 27, you 2001 Tax Rate Schedules—Line 8 Schedule Y-2 — Use if your 2001 filing status was Married filing separately Schedule X — Use if your 2001 filing status was Single If Schedule J, line 7, is: Over — But not over — Enter on Schedule J, line 8 $0 27,050 65,550 136,750 297,350 $27,050 65,550 136,750 297,350 ............. ........... $4,057.50 + 14,645.00 + 36,361.00 + 93,374.00 + 15% 27.5% 30.5% 35.5% 39.1% of the amount over — If Schedule J, line 7, is: Over — But not over — Enter on Schedule J, line 8 $0 27,050 65,550 136,750 297,350 $0 22,600 54,625 83,250 148,675 $22,600 54,625 83,250 148,675 ............. ........... $3,390.00 + 12,196.88 + 20,927.50 + 44,153.38 + Schedule Y-1 — Use if your 2001 filing status was Married filing jointly or Qualifying widow(er) If Schedule J, line 7, is: Over — But not over — Enter on Schedule J, line 8 $0 45,200 109,250 166,500 297,350 $45,200 109,250 166,500 297,350 ............ ........... $6,780.00 + 24,393.75 + 41,855.00 + 88,306.75 + 15% 27.5% 30.5% 35.5% 39.1% of the amount over — 15% 27.5% 30.5% 35.5% 39.1% $0 22,600 54,625 83,250 148,675 Schedule Z — Use if your 2001 filing status was Head of household of the amount over — If Schedule J, line 7, is: Over — But not over — Enter on Schedule J, line 8 $0 45,200 109,250 166,500 297,350 $0 36,250 93,650 151,650 297,350 $36,250 93,650 151,650 297,350 ............. ........... $5,437.50 + 21,222.50 + 38,912.50 + 90,636.00 + J-2 of the amount over — 15% 27.5% 30.5% 35.5% 39.1% $0 36,250 93,650 151,650 297,350 Page 3 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2001 Capital Gain Tax Worksheet—Line 8 Keep for Your Records Use this worksheet only if you entered capital gain distributions directly on line 13 of your 2001 Form 1040 (or line 10 of your 2001 Form 1040A) and checked the box on that line and elected farm income included on Schedule J, lines 5 and 6, does not include any net capital gain. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Amount from Schedule J, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount from your 2001 Form 1040, line 13 (or Form 1040A, line 10) . . . . . . . . . . Subtract line 2 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . Figure the tax on the amount on line 3. Use the 2001 Tax Rate Schedules on page J-2 Enter the smaller of: • The amount on line 1 above or • $27,050 if single for 2001; $45,200 if married filing ........... jointly or qualifying widow(er); $22,600 if married filing separately; or $36,250 if head of household. Enter the amount from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtract line 6 from line 5. If zero or less, enter -0- and go to line 9 . . . . . . . . . . . . Multiply line 7 by 10% (.10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the smaller of line 1 or line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the amount from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtract line 10 from line 9. If zero or less, enter -0- and go to line 13 . . . . . . . . . . Multiply line 11 by 20% (.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add lines 4, 8, and 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure the tax on the amount on line 1. Use the 2001 Tax Rate Schedules on page J-2 Tax. Enter the smaller of line 13 or line 14 here and on Schedule J, line 8. . . . . . . . } filed with Form 1045 or Form 1040X. If you did not have an NOL for 2001, enter the portion, if any, of the NOL carryovers and carrybacks to 2001 that were not used in 2001 and were carried to years after 2001. Example. John Farmington did not use income averaging for 2001, 2002, nor . . . .... 1. 2. 3. ............... . 5. . . . . . . . . . . 6. 7. ... 9. 10. 11. ... ... ... ... ... . . . . . . . . . . . . 2003. John has $18,000 of elected farm income on line 2. The taxable income before subtracting exemptions shown on his 2001 Form 1040, line 37, was $3,900. A deduction for exemptions of $2,900 was shown on line 38, and line 39, taxable income, was $1,000. However, John had a $22,300 NOL in 2002, $9,000 of which ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 8. 12. 13. 14. 15. was remaining to carry to 2001 after the NOL was carried back to 2000. To complete line 1 of the worksheet, John combines the $9,000 NOL deduction with the $1,000 from his 2001 Form 1040, line 39. The result is a negative $8,000, John’s 2001 taxable income, which he enters as a 2001 Tax Computation Worksheet for Certain Dependents and Nonresident Alien Individuals — Line 8 Keep for Your Records Use this worksheet only if you, or your spouse if filing jointly, did not receive (before offset) an advance payment of your 2001 taxes and (a) you, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2001 tax return or (b) you filed Form 1040NR for 2001. Special Rules. If: • The 2001 Capital Gain Tax Worksheet above applies, use this worksheet to figure the tax on lines 4 and 14 of the 2001 Capital Gain Tax Worksheet. • Part IV of the 2001 Schedule D applies, use this worksheet to figure the tax on lines 25 and 39 of Part IV. If the 2001 Schedule D Tax Worksheet applies, use this worksheet to figure the tax on lines 15 and 36 of the Schedule D Tax Worksheet. 1. Figure the tax on the amount on Schedule J, line 7 (or the applicable line of the worksheet or schedule listed above). Use the 2001 Tax Rate Schedules on page J-2 . . . . . . . . . . . . . . . . . . . . . 2. Is the amount on line 1 more than the amount shown below for your 2001 filing status? • Single or married filing separately—$900 • Married filing jointly or qualifying widow(er)—$1,800 • Head of household—$1,500 Yes. Enter: $300 if single or married filing separately for 2001; $500 if .......... head of household; $600 if married filing jointly or qualifying widow(er). No. Divide the amount on line 1 by 3.0. } 3. Subtract line 2 from line 1. Enter the result here and on Schedule J, line 8 (or the applicable line of the worksheet or schedule listed above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-3 1. 2. 3. Page 4 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. positive amount on line 1 of the 2001 worksheet. lines 25 and 39, or on the Schedule D Tax Worksheet, lines 15 and 36). return, if later), even if you did not file a tax return for 2002. When John filed his 2001 tax return, he had a $3,000 net capital loss deduction on Schedule D, line 18 (which was also entered on Form 1040, line 13), a $7,000 loss on Schedule D, line 17, and a $4,000 capital loss carryover to 2002. However, when John carried back the 2002 NOL to 2001, he refigured his 2001 capital loss carryover to 2002 as $7,000. John adds the $3,000 from Schedule D, line 18, and the $7,000 carryover. He subtracts from the result the $7,000 loss on his Schedule D, line 17, and enters $3,000 on line 2 of the worksheet. Exception. You must use the 2001 Tax Computation Worksheet for Certain Dependents and Nonresident Alien Individuals on page J-3 if you, or your spouse if filing jointly, did not receive (before offset) an advance payment of your 2001 taxes and either of the following apply. • You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2001 tax return. • You filed Form 1040NR for 2001. Instructions for 2002 Taxable Income Worksheet John had $1,000 of taxable income in 2001 that reduced the 2002 NOL carryback. The $2,900 of exemptions and $3,000 net capital loss deduction also reduced the amount of the 2002 NOL carryback. Therefore, only $2,100 was available to carry to 2003 and later years, as shown on his 2002 Form 1045, Schedule B, line 9. John enters the $2,100 on line 3 of the worksheet, and $5,100 on line 4. He then subtracts the $5,100 from the $8,000 on line 1 and enters the result, $2,900, on line 5 of the worksheet. He enters a negative $2,900 on Schedule J, line 5. He combines that amount with the $6,000 on Schedule J, line 6, and enters $3,100 on Schedule J, line 7. Line 8 If line 7 is zero, enter -0- on line 8. Otherwise, figure the tax on the amount on line 7 using: • The 2001 Tax Rate Schedules on page J-2, • The 2001 Capital Gain Tax Worksheet on page J-3, or • The Schedule D you filed for 2001 (but use the 2001 Tax Rate Schedules on page J-2 instead of the 2001 Tax Table when figuring the tax on Schedule D, If the 2001 Capital Gain Tax Worksheet or Schedule D also applies, follow the Special Rules on the worksheet on page J-3 to figure your tax. Line 9 If you used Schedule J to figure your tax for 2003 (that is, you entered the amount from that Schedule J, line 22, on Form 1040, line 41, or on Form 1040X), enter on line 9 the amount from your 2003 Schedule J, line 15. If you used Schedule J to figure your tax for 2002 but not 2003, enter on line 9 the amount from your 2002 Schedule J, line 3. If you figured your tax for both 2002 and 2003 without using Schedule J, enter on line 9 the taxable income from your 2002 tax return (or as previously adjusted by the IRS, an amended return, etc.). But if that amount is zero or less, complete the worksheet below to figure the amount to enter on line 9. If you filed your 2002 tax return using TeleFile, enter the taxable income from your TeleFile Tax Record. If you did not file a tax return for 2002, use the amount you would have reported as your taxable income had you been required to file a tax return. Be sure to keep all your records for 2002 until at least 3 years after April 15, 2005 (or the date you file your 2004 tax 2002 Taxable Income Worksheet—Line 9 Line 2. Any net capital loss deduction on your 2002 Schedule D, line 18, is not allowed for income averaging purposes to the extent it did not reduce your capital loss carryover to 2003. This could happen if the taxable income before subtracting exemptions shown on your 2002 Form 1040, line 39 (or as previously adjusted), was less than zero. Enter the amount by which your 2002 capital loss carryover to 2003 (the sum of your short- and long-term capital loss carryovers) exceeds the excess of the loss on your 2002 Schedule D, line 17, over the loss on your 2002 Schedule D, line 18. If you had any NOL carrybacks to 2002, be sure you refigured your 2002 capital loss carryover to 2003. Line 3. If you had an NOL for 2002, enter the amount of that NOL as figured on the 2002 Form 1045, Schedule A, line 27, you filed with Form 1045 or Form 1040X. If you did not have an NOL for 2002, enter the portion, if any, of the NOL carryovers and carrybacks to 2002 that were not used in 2002 and were carried to years after 2002. Example. John Farmington did not use income averaging for 2001, 2002, nor 2003. The taxable income before subtracting exemptions on his 2002 Form 1040, line 39, is a negative $30,000. A deduction for exemptions of $3,000 is shown on line 40, and line 41, taxable income, is limited to zero. John subtracts from the $30,000 loss the $3,000 deduction for exemptions. The result is a negative $33,000, John’s 2002 taxable income, which he enters as a positive amount on line 1 of the 2002 worksheet. John had a $3,000 net capital loss deduction on Schedule D, line 18 (which was also entered on Form 1040, line 13), and a $7,000 loss on Schedule D, line 17 (as ad- Keep for Your Records Complete this worksheet if you did not use Schedule J to figure your tax for 2003 and your 2002 taxable income was zero or less. See the instructions above before completing this worksheet. 1. Figure the taxable income from your 2002 tax return (or as previously adjusted) without limiting it to zero. If you had an NOL for 2002, do not include any NOL carryovers or carrybacks to 2002. Enter the result as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. If there is a loss on your 2002 Schedule D, line 18, add that loss (as a positive amount) and your 2002 capital loss carryover to 2003. Subtract from that sum the amount of the loss on your 2002 Schedule D, line 17, and enter the result . . 2. 3. If you had an NOL for 2002, enter it as a positive amount. Otherwise, enter as a positive amount the portion, if any, of the NOL carryovers and carrybacks to 2002 that were not used in 2002 and were carried to years after 2002 . . . . . . . . 3. 4. Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Subtract line 4 from line 1. Enter the result as a negative amount on Schedule J, line 9 . . . . . . . . . . J-4 1. 4. 5. Page 5 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2002 Tax Rate Schedules—Line 12 Schedule Y-2 — Use if your 2002 filing status was Married filing separately Schedule X — Use if your 2002 filing status was Single If Schedule J, line 11, is: Over — $0 6,000 27,950 67,700 141,250 307,050 But not over — Enter on Schedule J, line 12 $6,000 27,950 67,700 141,250 307,050 ............. ........... $600.00 + 3,892.50 + 14,625.00 + 36,690.00 + 94,720.00 + of the amount over — If Schedule J, line 11, is: Over — But not over — Enter on Schedule J, line 12 $0 6,000 27,950 67,700 141,250 307,050 $0 6,000 23,350 56,425 85,975 153,525 $6,000 23,350 56,425 85,975 153,525 ............. ........... $600.00 + 3,202.50 + 12,132.75 + 20,997.75 + 44,640.25 + 10% 15% 27% 30% 35% 38.6% Schedule Y-1 — Use if your 2002 filing status was Married filing jointly or Qualifying widow(er) If Schedule J, line 11, is: Over — $0 12,000 46,700 112,850 171,950 307,050 But not over — Enter on Schedule J, line 12 $12,000 46,700 112,850 171,950 307,050 ............ .......... $1,200.00 + 6,405.00 + 24,265.50 + 41,995.50 + 89,280.50 + 10% 15% 27% 30% 35% 38.6% of the amount over — 10% 15% 27% 30% 35% 38.6% $0 6,000 23,350 56,425 85,975 153,525 Schedule Z — Use if your 2002 filing status was Head of household of the amount over — If Schedule J, line 11, is: Over — But not over — Enter on Schedule J, line 12 $0 12,000 46,700 112,850 171,950 307,050 $0 10,000 37,450 96,700 156,600 307,050 $10,000 37,450 96,700 156,600 307,050 ............. ........... $1,000.00 + 5,117.50 + 21,115.00 + 39,085.00 + 91,742.50 + 2002 Capital Gain Tax Worksheet—Line 12 of the amount over — 10% 15% 27% 30% 35% 38.6% $0 10,000 37,450 96,700 156,600 307,050 Keep for Your Records Use this worksheet only if you entered capital gain distributions directly on line 13 of your 2002 Form 1040 (or line 10 of your 2002 Form 1040A) and checked the box on that line and elected farm income on Schedule J, lines 9 and 10, does not include any net capital gain. 1. 2. 3. 4. 5. Amount from Schedule J, line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount from your 2002 Form 1040, line 13 (or Form 1040A, line 10) . . . . . . Subtract line 2 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . Figure the tax on the amount on line 3. Use the 2002 Tax Rate Schedules above Enter the smaller of: • The amount on line 1 above or • $27,950 if single for 2002; $46,700 if married ............ filing jointly or qualifying widow(er); $23,350 if married filing separately; or $37,450 if head of household. Enter the amount from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtract line 6 from line 5. If zero or less, enter -0- and go to line 9 . . . . . . . . Multiply line 7 by 10% (.10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the smaller of line 1 or line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enter the amount from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtract line 10 from line 9. If zero or less, enter -0- and go to line 13 . . . . . . Multiply line 11 by 20% (.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add lines 4, 8, and 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure the tax on the amount on line 1. Use the 2002 Tax Rate Schedules above Tax. Enter the smaller of line 13 or line 14 here and on Schedule J, line 12 . . . } 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. justed). He also had a $7,000 capital loss carryover to 2003. John adds the $3,000 from Schedule D, line 18, and the $7,000 carryover. He subtracts from the result the $7,000 loss on his Schedule D, line 17, and enters $3,000 on line 2 of the worksheet. John enters $22,300 on line 3 of the worksheet, the 2002 NOL from his 2002 Form 1045, Schedule A, line 27. Of the $33,000 negative taxable income, the $3,000 deduction for exemptions, the . . . . . . . . . . . . . . . . . . . .... ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 5. .. . . . . . . . . $3,000 capital loss deduction, and his $4,700 standard deduction were not allowed in figuring the NOL. John had a $22,300 loss on his 2002 Schedule F, the only other item on his 2002 tax return. John enters $25,300 on line 4 and $7,700 on line 5. He enters $7,700 as a negative amount on Schedule J, line 9. He enters $6,000 on Schedule J, line 10, and a negative $1,700 on Schedule J, line 11. If he uses Schedule J to figure his tax for J-5 1. 2. 3. .............. 6. 7. .... 9. 10. 11. .... .... .... .... ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 12. 13. 14. 15. 2005, he will enter the negative $1,700 amount on his 2005 Schedule J as his 2002 taxable income for income averaging purposes. Line 12 If line 11 is zero or less, enter -0- on line 12. Otherwise, figure the tax on the amount on line 11 using: Page 6 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. • The 2002 Tax Rate Schedules on page J-5, • The 2002 Capital Gain Tax Worksheet on page J-5, or • The Schedule D you filed for 2002 (but use the 2002 Tax Rate Schedules on page J-5 instead of the 2002 Tax Table when figuring the tax on Schedule D, lines 25 and 39, or on the Schedule D Tax Worksheet, lines 15 and 36). taxable income before subtracting exemptions shown on your 2003 Form 1040, line 38 (or as previously adjusted), was less than zero. Enter the amount by which your 2003 capital loss carryover to 2004 (the sum of your short- and long-term capital loss carryovers) exceeds the excess of the loss on your 2003 Schedule D, line 17a, over the loss on your 2003 Schedule D, line 18. Line 3. If you had an NOL for 2003, enter Line 13 If you used Schedule J to figure your tax for 2003 (that is, you entered the amount from that Schedule J, line 22, on Form 1040, line 41, or on Form 1040X), enter on line 13 the amount from that Schedule J, line 3. If you did not use Schedule J to figure your tax for 2003, enter on line 13 the taxable income from your 2003 tax return (or as previously adjusted by the IRS, an amended return, etc.). But if that amount is zero or less, complete the worksheet below to figure the amount to enter on line 13. If you filed your 2003 tax return using TeleFile, enter the taxable income from your TeleFile Tax Record. If you did not file a tax return for 2003, use the amount you would have reported as your taxable income had you been required to file a tax return. Be sure to keep all your records for 2003 until at least 3 years after April 15, 2005 (or the date you file your 2004 tax return, if later), even if you did not file a tax return for 2003. Instructions for 2003 Taxable Income Worksheet Line 2. Any net capital loss deduction on your 2003 Schedule D, line 18, is not allowed for income averaging purposes to the extent it did not reduce your capital loss carryover to 2004. This could happen if the the amount of that NOL as figured on the 2003 Form 1045, Schedule A, line 27, you filed with Form 1045 or Form 1040X. If you did not have an NOL for 2003, enter the portion, if any, of the NOL carryovers and carrybacks to 2003 that were not used in 2003 and were carried to years after 2003. Example. John Farmington did not use income averaging for 2001, 2002, nor 2003. The taxable income before subtracting exemptions on his 2003 Form 1040, line 38, is a negative $1,000. This amount includes an NOL deduction (NOLD) on his 2003 Form 1040, line 21, of $2,100. The $2,100 is the portion of the 2002 NOL that was remaining from 2001 to be carried to 2003. See the examples that begin on pages J-3 and J-4. A deduction for exemptions of $3,050 is shown on Form 1040, line 39, and line 40, taxable income, is limited to zero. John does not have an NOL for 2003. John subtracts from the $1,000 negative amount on Form 1040, line 38, the $3,050 deduction for exemptions. The result is a negative $4,050, John’s 2003 taxable income, which he enters as a positive amount on line 1 of the 2003 worksheet. John had a $3,000 net capital loss deduction on Schedule D, line 18 (which was also entered on Form 1040, line 13a), a $7,000 loss on Schedule D, line 17a, and a $5,000 capital loss carryover to 2004 (his 2003 capital loss carryover to 2004 was $5,000, not $4,000, because the amount on 2003 Taxable Income Worksheet—Line 13 his Form 1040, line 38, was a negative $1,000). John adds the $3,000 from Schedule D, line 18, and the $5,000 carryover. He reduces the result by the $7,000 loss on his Schedule D, line 17a, and enters $1,000 on line 2 of the worksheet. John enters -0- on line 3 of the worksheet because he does not have an NOL for 2003 and did not have an NOL carryover from 2003 available to carry to 2004 and later years. The NOLD for 2003 of $2,100 was reduced to zero because it did not exceed his modified taxable income of $4,100. Modified taxable income is figured by adding back the $3,000 net capital loss deduction and the $3,050 of exemptions to negative taxable income (figured without regard to the NOLD) of $1,950. John enters $1,000 on line 4 and $3,050 on line 5. He enters $3,050 as a negative amount on Schedule J, line 13. He enters $6,000 on Schedule J, line 14, and $2,950 on Schedule J, line 15. If he uses Schedule J to figure his tax for 2005, he will enter $2,950 on his 2005 Schedule J as his 2003 taxable income for income averaging purposes. Line 16 If line 15 is zero or less, enter -0- on line 16. Otherwise, figure the tax on the amount on line 15 using: • The 2003 Tax Rate Schedules on page J-7, • The 2003 Qualified Dividends and Capital Gain Tax Worksheet on page J-8, or • The Schedule D you filed for 2003 (but use the 2003 Tax Rate Schedules on page J-7 instead of the 2003 Tax Table when figuring the tax on Schedule D, lines 50 and 52, or on the Schedule D Tax Worksheet, lines 48 and 50). Keep for Your Records Complete this worksheet if your 2003 taxable income is zero or less. See the instructions above before completing this worksheet. 1. Figure the taxable income from your 2003 tax return (or as previously adjusted) without limiting it to zero. If you had an NOL for 2003, do not include any NOL carryovers or carrybacks to 2003. Enter the result as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. If there is a loss on your 2003 Schedule D, line 18, add that loss (as a positive amount) and your 2003 capital loss carryover to 2004. Subtract from that sum the amount of the loss on your 2003 Schedule D, line 17a, and enter the result 2. 3. If you had an NOL for 2003, enter it as a positive amount. Otherwise, enter as a positive amount the portion, if any, of the NOL carryovers and carrybacks to 2003 that were not used in 2003 and were carried to years after 2003 . . . . . . . . 3. 4. Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Subtract line 4 from line 1. Enter the result as a negative amount on Schedule J, line 13 . . . . . . . . . J-6 1. 4. 5. Page 7 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2003 Tax Rate Schedules—Line 16 Schedule Y-2 — Use if your 2003 filing status was Married filing separately Schedule X — Use if your 2003 filing status was Single If Schedule J, line 15, is: Over — But not over — $0 7,000 28,400 68,800 143,500 311,950 $7,000 28,400 68,800 143,500 311,950 ............. of the amount over — Enter on Schedule J, line 16 ........... $700.00 + 3,910.00 + 14,010.00 + 34,926.00 + 90,514.50 + 10% 15% 25% 28% 33% 35% $0 7,000 28,400 68,800 143,500 311,950 Schedule Y-1 — Use if your 2003 filing status was Married filing jointly or Qualifying widow(er) If Schedule J, line 15, is: Over — But not over — $0 14,000 56,800 114,650 174,700 311,950 $14,000 56,800 114,650 174,700 311,950 ............ of the amount over — Enter on Schedule J, line 16 ........... $1,400.00 + 7,820.00 + 22,282.50 + 39,096.50 + 84,389.00 + 10% 15% 25% 28% 33% 35% $0 14,000 56,800 114,650 174,700 311,950 If Schedule J, line 15, is: Over — $0 7,000 28,400 57,325 87,350 155,975 But not over — $7,000 28,400 57,325 87,350 155,975 ............. of the amount over — Enter on Schedule J, line 16 ........... $700.00 + 3,910.00 + 11,141.25 + 19,548.25 + 42,194.50 + 10% 15% 25% 28% 33% 35% $0 7,000 28,400 57,325 87,350 155,975 Schedule Z — Use if your 2003 filing status was Head of household If Schedule J, line15, is: Over — $0 10,000 38,050 98,250 159,100 311,950 J-7 But not over — $10,000 38,050 98,250 159,100 311,950 ............. of the amount over — Enter on Schedule J, line 16 ........... $1,000.00 + 5,207.50 + 20,257.50 + 37,295.50 + 87,736.00 + 10% 15% 25% 28% 33% 35% $0 10,000 38,050 98,250 159,100 311,950 Page 8 of 8 of 2004 Instructions for Schedule J 10:51 - 28-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Lines 18, 19, and 20 amended your return or the IRS made changes to it, enter the corrected amount. If you filed your 2001, 2002, or 2003 tax return using TeleFile, enter your tax from your TeleFile Tax Record. If you 2003 Qualified Dividends and Capital Gain Tax Worksheet—Line 16 Keep for Your Records Use this worksheet only if: • You entered (a) qualified dividends on your 2003 Form 1040, line 9b (or your 2003 Form 1040A, line 9b) or (b) capital gain distributions directly on your 2003 Form 1040, line 13a (or your 2003 Form 1040A, line 10a) and checked the box on that line and • Your elected farm income on Schedule J, line 2, does not include any net capital gain. 1. Amount from Schedule J, line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Enter the total of the amounts from your 2003 Form 1040, lines 9b and 13a (or Form 1040A, lines 9b and 10a) . . . . . . . . . . . . . . 2. 3. Amount, if any, from your 2003 Form 4952, line 4g . . . . . . . . . . 3. 4. Subtract line 3 from 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Enter the smaller of: • The amount on line 1 above or • $56,800 if married filing jointly or qualifying widow(er) for ......... 2003, $28,400 if single or married filing separately, or $38,050 if head of household. 6. Subtract line 4 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . 7. Subtract line 6 from line 5. If zero or less, enter -0- and go to line 13 . . . . . . . . . . . . 8. Enter the total of the amounts from your 2003 Form 1040, lines 9b and 13b (or Form 1040A, lines 9b and 10b) . . . . . . . . . . . . . 8. 9. Enter the smaller of line 7 or 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Multiply line 8 by 5% (.05) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Subtract line 9 from line 7. If zero, go to line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Multiply line 11 by 10% (.10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Enter the smaller of line 1 or line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. Enter the amount from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. Subtract line 14 from line 13. If zero or less, enter -0- and go to line 23 . . . . . . . . . . 16. Enter the total of the amounts from your 2003 Form 1040, lines 9b and 13b (or Form 1040A, lines 9b and 10b) . . . . . . . . . . . . . 16. 17. Enter the amount from line 9 (if line 9 is blank, enter -0-) . . . . . . 17. 18. Subtract line 17 from line 16 . . . . . . . . . . . . . . . . . . . . . . . . . . 18. 19. Enter the smaller of line 15 or line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. Multiply line 19 by 15% (.15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21. Subtract line 19 from line 15. If zero, go to line 23 . . . . . . . . . . . . . . . . . . . . . . . . 22. Multiply line 21 by 20% (.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23. Figure the tax on the amount on line 6. Use the 2003 Tax Rate Schedules on page J-7 24. Add lines 10, 12, 20, 22, and 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25. Figure the tax on the amount on line 1. Use the 2003 Tax Rate Schedules on page J-7 26. Tax. Enter the smaller of line 24 or line 25 here and on Schedule J, line 16 . . . . . . . } J-8 ...... 1. ...... 4. ...... 5. ...... ...... 6. 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . . . . . 10. 11. . . . . . . . . . . . . . . . 12. 13. 14. 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. .... 21. .... .... .... .... .... . . . . . . . . . . . 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. 23. 24. 25. 26. PAGER/SGML Userid: ________ Fileid: I1040SSE.XML Leading adjust: 0/0/0% ( 6-Oct-2004) ❏ Draft (Init. & date) ❏ Ok to Print Filename: D:\USERS\qjfcb\documents\Epicfiles\2004\04i1040Sch_SE.xml Page 1 of 4 of 2004 Instructions for Schedule SE (Form 1040) 11:05 - 6-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule SE (Form 1040) Use Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment. Social Security Administration uses the information from Schedule SE to figure your Self-Employment The benefits under the social security program. This tax applies no matter how old you are and even if you are already getting social security or Medicare benefits. Tax See Pub. 533. Additional information. Section references are to the Internal Revenue Code. General Instructions What’s New For 2004, the maximum amount of self-employment income subject to social security tax is $87,900. Who Must File Schedule SE You must file Schedule SE if: • Your net earnings from self-employment (see page SE-2) from other than church employee income were $400 or more, or • You had church employee income of $108.28 or more — see Employees of Churches and Church Organizations below. Who Must Pay Self-Employment (SE) Tax? Self-Employed Persons You must pay SE tax if you had net earnings of $400 or more as a self-employed person. If you are in business for yourself or you are a farmer, you are self-employed. You must also pay SE tax on your share of certain partnership income and your guaranteed payments. See Partnership Income or Loss on page SE-2. Employees of Churches and Church Organizations If you had church employee income of $108.28 or more, you must pay SE tax. Church employee income is wages you received as an employee (other than as a minister or member of a religious order) of a church or qualified church-controlled organization that has a certificate in effect electing an exemption from employer social security and Medicare taxes. Ministers and Members of Religious Orders In most cases, you must pay SE tax on salaries and other income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner. But if you filed Form 4361 and received IRS approval, you will be exempt from paying SE tax on those net earnings. If you had no other income subject to SE tax, enter “Exempt — Form 4361” on Form 1040, line 57. However, if you had other earnings of $400 or more subject to SE tax, see line A at the top of Long Schedule SE. If you have ever filed Form 2031 to elect social security coverage on your earnings as a minister, you cannot revoke that election. If you must pay SE tax, include this income on either Short or Long Schedule SE, line 2. But do not report it on Long Schedule SE, line 5a; it is not considered church employee income. Also, include on line 2: • The rental value of a home or an allowance for a home furnished to you (including payments for utilities), and • The value of meals and lodging provided to you, your spouse, and your dependents for your employer’s convenience. However, do not include on line 2: • Retirement benefits you received from a church plan after retirement, or • The rental value of a home or an allowance for a home furnished to you (including payments for utilities) after retirement. If you were a duly ordained minister who was an employee of a church and you must pay SE tax, the unreimbursed business expenses that you incurred as a church employee are allowed only as an itemized deduction for income tax purposes. Subtract the allowable amount from your SE earnings when figuring your SE tax. If you were a U.S. citizen or resident alien serving outside the United States as a minister or member of a religious order and you must pay SE tax, you cannot reduce your net earnings by the foreign housing exclusion or deduction. See Pub. 517 for details. Members of Certain Religious Sects If you have conscientious objections to social security insurance because of your membership in and belief in the teachings SE-1 Cat. No. 24334P of a religious sect recognized as being in existence at all times since December 31, 1950, and which has provided a reasonable level of living for its dependent members, you are exempt from SE tax if you received IRS approval by filing Form 4029. In this case, do not file Schedule SE. Instead, enter “Exempt — Form 4029” on Form 1040, line 57. See Pub. 517 for details. U.S. Citizens Employed by Foreign Governments or International Organizations You must pay SE tax on income you earned as a U.S. citizen employed by a foreign government (or, in certain cases, by a wholly owned instrumentality of a foreign government or an international organization under the International Organizations Immunities Act) for services performed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), or the Virgin Islands. Report income from this employment on either Short or Long Schedule SE, line 2. If you performed services elsewhere as an employee of a foreign government or an international organization, those earnings are exempt from SE tax. U.S. Citizens or Resident Aliens Living Outside the United States If you are a self-employed U.S. citizen or resident alien living outside the United States, in most cases you must pay SE tax. You cannot reduce your foreign earnings from self-employment by your foreign earned income exclusion. Exception. The United States has social security agreements with many countries to eliminate dual taxes under two social security systems. Under these agreements, you must generally pay social security and Medicare taxes to only the country you live in. The United States now has social security agreements with the following countries: Australia, Austria, Belgium, Canada, Chile, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, and the Page 2 of 4 of 2004 Instructions for Schedule SE (Form 1040) 11:05 - 6-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. United Kingdom. Additional agreements are expected in the future. If you have questions about international social security agreements, you can: • Visit the Social Security Administration (SSA) website at www.socialsecurity. gov/international, • Call the SSA Office of International Programs at (410) 965-4538 or (410) 965-0377 (long-distance charges may apply), or • Write to Social Security Administration, Office of International Programs, P.O. Box 17741, Baltimore, MD 21235-7741. If your self-employment income is exempt from SE tax, you should get a statement from the appropriate agency of the foreign country verifying that your self-employment income is subject to social security coverage in that country. If the foreign country will not issue the statement, contact the SSA at the address shown above. Do not complete Schedule SE. Instead, attach a copy of the statement to Form 1040 and enter “Exempt, see attached statement” on Form 1040, line 57. More Than One Business on the other spouse’s Schedule C, C-EZ, or F (except income not included in net earnings from self-employment as explained on page SE-3). Enter on the dotted line to the left of Schedule SE, line 3, “Community Income Taxed to Spouse” and the amount of any net profit or (loss) allocated to your spouse as community income. Combine that amount with the total of lines 1 and 2 and enter the result on line 3. If you are not the spouse who carried on the business and you had no other income subject to SE tax, enter “Exempt Community Income” on Form 1040, line 57; do not file Schedule SE. However, if you had other earnings subject to SE tax of $400 or more, enter on the dotted line to the left of Schedule SE, line 3, “Exempt Community Income” and the amount of net profit or (loss) from Schedule C, C-EZ, or F allocated to you as community income. If that amount is a net profit, subtract it from the total of lines 1 and 2, and enter the result on line 3. If that amount is a loss, treat it as a positive amount, add it to the total of lines 1 and 2, and enter the result on line 3. If you had two or more businesses, your net earnings from self-employment are the combined net earnings from all of your businesses. If you had a loss in one business, it reduces the income from another. Figure the combined SE tax on one Schedule SE. Community income included on Schedule(s) C, C-EZ, or F must be divided for income tax purposes on the basis of the community property laws. Joint Returns If your tax year is a fiscal year, use the tax rate and earnings base that apply at the time the fiscal year begins. Do not prorate the tax or earnings base for a fiscal year that overlaps the date of a rate or earnings base change. Show the name of the spouse with SE income on Schedule SE. If both spouses have SE income, each must file a separate Schedule SE. However, if one spouse qualifies to use Short Schedule SE and the other has to use Long Schedule SE, both can use the same form. One spouse should complete the front and the other the back. Include the total profits or losses from all businesses on Form 1040, as appropriate. Enter the combined SE tax on Form 1040, line 57. Community Income In most cases, if any of the income from a business (including farming) is community income, all of the income from that business is SE earnings of the spouse who carried on the business. The facts in each case will determine which spouse carried on the business. If you and your spouse are partners in a partnership, see Partnership Income or Loss on this page. If you and your spouse had community income and file separate returns, attach Schedule SE to the return of the spouse with the SE income. Also, attach Schedule(s) C, C-EZ, or F to the return of each spouse. If you are the spouse who carried on the business, you must include on Schedule SE, line 3, the net profit or (loss) reported Fiscal Year Filers Specific Instructions Read the chart on page 1 of Schedule SE to see if you can use Section A, Short Schedule SE, or if you must use Section B, Long Schedule SE. For either section, you need to know what to include as net earnings from self-employment. Read the following instructions to see what to include as net earnings and how to fill in either Short or Long Schedule SE, lines 1 and 2. Enter all negative amounts in parentheses. Net Earnings From Self-Employment What Is Included in Net Earnings From Self-Employment? In most cases, net earnings include your net profit from a farm or nonfarm business. If you were a partner in a partnership, see the following instructions. SE-2 Partnership Income or Loss If you were a general or limited partner in a partnership, include on line 1 or line 2, whichever applies, the amount of net earnings from self-employment from Schedule K-1 (Form 1065), box 14, with code A, and Schedule K-1 (Form 1065-B), box 9. General partners should reduce this amount before entering it on Schedule SE by any section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties. If you reduce the amount you enter on Schedule SE, attach an explanation. If a partner died and the partnership continued, include in SE income the deceased’s distributive share of the partnership’s ordinary income or loss through the end of the month in which he or she died. See section 1402(f). If you were married and both you and your spouse were partners in a partnership, each of you must pay SE tax on your own share of the partnership income. Each of you must file a Schedule SE and report the partnership income or loss on Schedule E (Form 1040), Part II, for income tax purposes. SE income belongs to the person who is the member of the partnership and cannot be treated as SE income by the nonmember spouse even in community property states. Share Farming You are considered self-employed if you produced crops or livestock on someone else’s land for a share of the crops or livestock produced (or a share of the proceeds from the sale of them). This applies even if you paid another person (an agent) to do the actual work or management for you. Report your net earnings for income tax purposes on Schedule F (Form 1040) and for SE tax purposes on Schedule SE. See Pub. 225 for details. Other Income and Losses Included in Net Earnings From Self-Employment 1. Rental income from a farm if, as landlord, you materially participated in the production or management of the production of farm products on this land. This income is farm earnings. To determine whether you materially participated in farm management or production, do not consider the activities of any agent who acted for you. The material participation tests are explained in Pub. 225. 2. Cash or a payment-in-kind from the Department of Agriculture for participating in a land diversion program. 3. Payments for the use of rooms or other space when you also provided substantial services. Examples are hotel rooms, boarding houses, tourist camps or Page 3 of 4 of 2004 Instructions for Schedule SE (Form 1040) 11:05 - 6-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. homes, parking lots, warehouses, and storage garages. 4. Income from the retail sale of newspapers and magazines if you were age 18 or older and kept the profits. 5. Amounts received by current or former self-employed insurance agents and salespersons that are: a. Paid after retirement but figured as a percentage of commissions received from the paying company before retirement, b. Renewal commissions, or c. Deferred commissions paid after retirement for sales made before retirement. However, certain termination payments received by former insurance salespersons are not included in net earnings from self-employment (as explained in item 9 under Income and Losses Not Included in Net Earnings From Self-Employment on this page). 6. Income of certain crew members of fishing vessels with crews of normally fewer than 10 people. See Pub. 595 for details. 7. Fees as a state or local government employee if you were paid only on a fee basis and the job was not covered under a federal-state social security coverage agreement. 8. Interest received in the course of any trade or business, such as interest on notes or accounts receivable. 9. Fees and other payments received by you for services as a director of a corporation. 10. Recapture amounts under sections 179 and 280F that you included in gross income because the business use of the property dropped to 50% or less. Do not include amounts you recaptured on the disposition of property. See Form 4797. 11. Fees you received as a professional fiduciary. This may also apply to fees paid to you as a nonprofessional fiduciary if the fees relate to active participation in the operation of the estate’s business, or the management of an estate that required extensive management activities over a long period of time. 12. Gain or loss from section 1256 contracts or related property by an options or commodities dealer in the normal course of dealing in or trading section 1256 contracts. Income and Losses Not Included in Net Earnings From Self-Employment 1. Salaries, fees, etc., subject to social security or Medicare tax that you received for performing services as an employee, including services performed as a public official (except as a fee basis government employee as explained in item 7 under Other Income and Losses Included in Net Earnings From Self-Employment) or as an employee or employee representative under the railroad retirement system. 2. Fees received for services performed as a notary public. If you had no other income subject to SE tax, enter “Exempt-Notary” on Form 1040, line 57. However, if you had other earnings of $400 or more subject to SE tax, enter “Exempt-Notary” and the amount of your net profit as a notary public from Schedule C or Schedule C-EZ on the dotted line to the left of Schedule SE, line 3. Subtract that amount from the total of lines 1 and 2 and enter the result on line 3. 3. Income you received as a retired partner under a written partnership plan that provides for lifelong periodic retirement payments if you had no other interest in the partnership and did not perform services for it during the year. 4. Income from real estate rentals if you did not receive the income in the course of a trade or business as a real estate dealer. Report this income on Schedule E. 5. Income from farm rentals (including rentals paid in crop shares) if, as landlord, you did not materially participate in the production or management of the production of farm products on the land. See Pub. 225 for details. 6. Dividends on shares of stock and interest on bonds, notes, etc., if you did not receive the income in the course of your trade or business as a dealer in stocks or securities. 7. Gain or loss from: a. The sale or exchange of a capital asset; b. The sale, exchange, involuntary conversion, or other disposition of property unless the property is stock in trade or other property that would be includible in inventory, or held primarily for sale to customers in the ordinary course of the business; or c. Certain transactions in timber, coal, or domestic iron ore. 8. Net operating losses from other years. 9. Termination payments you received as a former insurance salesperson if all of the following conditions are met. a. The payment was received from an insurance company because of services you performed as an insurance salesperson for the company. b. The payment was received after termination of your agreement to perform services for the company. c. You did not perform any services for the company after termination and before the end of the year in which you received the payment. d. You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date of termination. SE-3 e. The amount of the payment depended primarily on policies sold by or credited to your account during the last year of the agreement, or the extent to which those policies remain in force for some period after termination, or both. f. The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payment depended on length of service). Statutory Employee Income If you were required to check the box on Schedule C or C-EZ, line 1, because you were a statutory employee, do not include the net profit or (loss) from that Schedule C, line 31 (or the net profit from Schedule C-EZ, line 3), on Short or Long Schedule SE, line 2. But if you file Long Schedule SE, be sure to include statutory employee social security wages and tips from Form W-2 on line 8a. Optional Methods How Can the Optional Methods Help You? Social security coverage. The optional methods may give you credit toward your social security coverage even though you have a loss or a small amount of income from self-employment. Earned income credit (EIC). Using the op- tional methods may qualify you to claim the EIC or give you a larger credit if your net earnings from self-employment (determined without using the optional methods) are less than $1,600. Figure the EIC with and without using the optional methods to see if the optional methods will benefit you. Additional child tax credit. Using the optional methods may qualify you to claim the additional child tax credit or give you a larger credit if your net earnings from self-employment (determined without using the optional methods) are less than $1,600. Figure the additional child tax credit with and without using the optional methods to see if the optional methods will benefit you. Child and dependent care credit. The optional methods may help you qualify for this credit or give you a larger credit if your net earnings from self-employment (determined without using the optional methods) are less than $1,600. Figure this credit with and without using the optional methods to see if the optional methods will benefit you. Self-employed health insurance deduction. The optional methods of computing net earnings from self-employment may be used to figure your self-employed health insurance deduction. Page 4 of 4 of 2004 Instructions for Schedule SE (Form 1040) 11:05 - 6-OCT-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Using the optional methods may give you the benefits described on page SE-3, but they may also increase your SE tax. Farm Optional Method You may use this method to figure your net earnings from farm self-employment if your gross farm income was $2,400 or less or your net farm profits were less than $1,733. Net farm profits is the total of the amounts from: • Schedule F (Form 1040), line 36, and • Schedule K-1 (Form 1065), box 14, with code A (from farm partnerships). There is no limit on how many years you can use this method. Under this method, you report on Part II, line 15, two-thirds of your gross farm income, up to $1,600, as your net earnings. This method can increase or decrease your net earnings from farm self-employment even if the farming business had a loss. You can change the method after you file your return. That is, you can change from the regular to the optional method or from the optional to the regular method. To do this, file Form 1040X. For a farm partnership, figure your share of gross income based on the partnership agreement. With guaranteed payments, your share of the partnership’s gross income is your guaranteed payments plus your share of the gross income after it is reduced by all guaranteed payments made by the partnership. If you were a limited partner, include only guaranteed payments for services you actually rendered to or on behalf of the partnership. Nonfarm Optional Method You may be able to use this method to figure your net earnings from nonfarm self-employment if your net nonfarm profits were less than $1,733 and also less than 72.189% of your gross nonfarm income. Net nonfarm profits is the total of the amounts from: • Schedule C (Form 1040), line 31, • Schedule C-EZ (Form 1040), line 3, • Schedule K-1 (Form 1065), box 14, with code A (from other than farm partnerships), and • Schedule K-1 (Form 1065-B), box 9. To use this method, you also must be regularly self-employed. You meet this requirement if your actual net earnings from self-employment were $400 or more in 2 of the 3 years preceding the year you use the nonfarm method. The net earnings of $400 or more could be from either farm or nonfarm earnings or both. The net earnings include your distributive share of partnership income or loss subject to SE tax. Use of the nonfarm optional method from nonfarm SE-4 self-employment is limited to 5 years. The 5 years do not have to be consecutive. Under this method, you report on Part II, line 17, two-thirds of your gross nonfarm income, up to $1,600, as your net earnings. But you cannot report less than your actual net earnings from nonfarm self-employment. You can change the method after you file your return. That is, you can change from the regular to the optional method or from the optional to the regular method. To do so, file Form 1040X. Figure your share of gross income from a nonfarm partnership in the same manner as a farm partnership. See Farm Optional Method on this page for details. Using Both Optional Methods If you can use both methods, you can report less than your total actual net earnings from farm and nonfarm self-employment, but you cannot report less than your actual net earnings from nonfarm self-employment alone. If you use both methods to figure net earnings, you cannot report more than $1,600 of net earnings from self-employment. Page 77 of 79 of Instructions 1040 10:50 - 3-NOV-2004 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Index to Instructions A Address Change . . . . . . . . . . . . . . . . . . . . 16 Addresses of IRS Centers . . . . . . . . Back Cover Adjusted Gross Income . . . . . . . . . . . . . . 26-31 Adoption Expenses: Credit for . . . . . . . . . . . . . . . . . . . . . . . 39 Employer-Provided Benefits for . . . . . . . . . 19 Advance Earned Income Credit Payments . . . . 39 Alimony Paid . . . . . . . . . . . . . . . . . . . . . . 30 Alimony Received . . . . . . . . . . . . . . . . . . . 21 Alternative Minimum Tax . . . . . . . . . . . . 35-36 Amended Return . . . . . . . . . . . . . . . . . . . . 58 Amount You Owe . . . . . . . . . . . . . . . . . 55-56 Annuities . . . . . . . . . . . . . . . . . . . . . . 22-24 Archer MSAs . . . . . . . . . . . . . . . 24, 31, 39, 40 At-Risk Rules . . . . . . . . . . . . . C-6*, E-1*, F-6* Attachments to the Return . . . . . . . . . . . . . . 57 B Blindness — Proof of . . . . . . . . . . . . . . . . . 31 Business Income and Expenses (Schedule C) . . . . . . . . . . . . . . . . . . . . C-1* Business Use of Home . . . . . . . A-6*, C-6*, F-6* . . . . . . . . . To . . . . . . . . . . 36 . . . . 19 . . . . 19 . . 14-15 . . . . . 7 Gambling . . . . . . . . . . . . . . . . . . . . Gifts to Charity . . . . . . . . . . . . . . . . . Golden Parachute Payments . . . . . . . . . Group-Term Life Insurance — Uncollected Tax on . . . . . . . . . . . . . . . . . . . . Capital Gain Distributions . . . . . . . . . . 21, D-1* Capital Gains and Losses (Schedule D) . . . . . D-1* Casualty and Theft Losses . . . . . . . . . . . . . A-5* Charity — Gifts to . . . . . . . . . . . . . . . . . . A-4* Child and Dependent Care Expenses — Credit for . . . . . . . . . . . . . . . 36 Child tax credits . . . . . . . . . . . 11, 18, 37-38, 54 Children of Divorced or Separated Parents . . . . 18 Clean-Fuel Vehicles . . . . . . . . . . . . . . . . . . 31 Commissioner’s Message . . . . . . . . . . . . . . . 2 Community Property States . . . . . . . . . . . . . 19 Contributions to Reduce Debt Held by the Public . . . . . . . . . . . . . . . . . . . . . . . . . 58 Corrective Distributions . . . . . . . . . . . . . . . 19 Customer Service Standards . . . . . . . . . . . . . . 6 D Daycare Center Expenses . . . . . . . . . . . . . . 36 Death of a Taxpayer . . . . . . . . . . . . . . . . . 58 Debt Held by the Public, Gift to Reduce . . . . . 58 Dependent Care Benefits . . . . . . . . . . . . . . . 19 Dependents: Exemptions for . . . . . . . . . . . . . . . . . . . 18 Standard Deduction . . . . . . . . . . . . . . . . 32 Who Can Be Claimed as . . . . . . . . . . . . . 18 Direct Deposit of Refund . . . . . . . . . . . . 54-55 Dividends: Nominees . . . . . . . . . . . . . . . . . . . . . . B-1* Nondividend Distributions . . . . . . . . . . . . 20 Ordinary Dividends . . . . . . . . . . . . . . . . 20 Qualified Dividends . . . . 20, 33-34, D-1*, D-2* Divorced or Separated Parents — Children of . . 18 Donations . . . . . . . . . . . . . . . . . . . . . . . A-4* Dual-Status Aliens . . . . . . . . . . . . . . . . . 12, 17 E Earned Income Credit (EIC) . . . . . . . . . 11, 41-53 Combat Pay, Nontaxable . . . . . . . . . . . 11, 43 Education: Credits . . . . . . . . . . . . . . . . . . . . 36, A-6* Expenses . . . . . . . . . . . . 11, 28-29, 36, A-6* Recapture of Education Credits . . . . . . . . . 33 Savings Accounts . . . . . . . . . . . . . . . . 24, 39 Educator Expenses . . . . . . . . . . . . . . . . . . . 26 Elderly Persons: Credit for . . . . . . . . . . . . . . . . . . . . . . . 36 Expenses for Care of . . . . . . . . . . . . . . . . 36 Standard Deduction . . . . . . . . . . . . . . . . 32 Electronic Filing (e-file) . . . . . . . . . . . . 3, 7, 12, 14, 16, 54, 55, 56-57 Employee Business Expenses . . . . . . . . . . . A-5* Estates and Trusts . . . . . . . . . . . . . . . . . . E-6* Estimated Tax . . . . . . . . . . . . . . 40, 55, 56, 57 Everyday Tax Solutions . . . . . . . . . . . . . . . 59 Excess Salary Deferrals . . . . . . . . . . . . . . . 19 Excess Social Security and Tier 1 RRTA Tax Withheld . . . . . . . . . . . . . . . . . . . . 54 Exemptions . . . . . . . . . . . . . . . . . . . . . 18, 33 Extension of Time To File . . . . . . . . . . . . 12, 54 F . . . F-1* . . . J-1* . . . . . . . . 11, 26 12-13 16-17 . B-2* Income . . . . . . . . . . . . . . . . . . . . . . . . 19-25 Income Tax Withholding (Federal) . . . . . . 40, 57 Individual Retirement Arrangements (IRAs): Contributions to (line 25) . . . . . . . . . 11, 26-27 Credit for Contributions to . . . . . . . . . . . . 36 Distributions from (lines 15a and 15b) . . . . . 22 Nondeductible Contributions to . . . . . 22, 26-27 Injured Spouse Claim . . . . . . . . . . . . . . . . . 54 Innocent Spouse Relief . . . . . . . . . . . . . . . . 57 Installment Payments . . . . . . . . . . . . . . . 10, 55 Interest: Late Payment of Tax . . . . . . . . . . . . . . . . 59 Penalty on Early Withdrawal of Savings . . . 30 Interest Income: Exclusion of Savings Bond Interest . . . . . . B-1* Nominee . . . . . . . . . . . . . . . . . . . . . . B-1* Tax-Exempt . . . . . . . . . . . . . . . . . 20, B-1* Taxable . . . . . . . . . . . . . . . . . . . . 19, B-1* Interest You Paid . . . . . . . . . . . . . . . . . . A-3* Itemized Deductions or Standard Deduction . . . . . . . . . . . . . . . . . . . . 31-32 K Kidnapped Child — Parent of . . . . . . . . . . . . 58 L Line Instructions for Form 1040 . . . . . . . . 16-57 Long-Term Care Insurance . . . . . . . . . 30, A-1* Lump-Sum Distributions . . . . . . . . . . . . . . . 24 M . . . . . 17 . . . . . 17 . . . . . 17 . . . . A-1* A-4*, C-3* A-5*, A-6* . 39, A-4* . . . 11, 29 N Name Change . . . . . . . . . . . . . . . . . . . . 16, 58 National Debt — Gift To Reduce the . . . . . . . . 58 Nonresident Alien . . . . . . . . . . . . . . 12, 16, 17 O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15 58 . 7 Q R . . . . . . . . . 30 11, 24, 29, 39, 40 . . . . . . . . . . 6 . . . . . . . . D-2* . . . . . . . . . 39 Offsets . . . . . . . . . . . . . . . . . . . . . Order Blank for Forms and Publications Original Issue Discount (OID) . . . . . . Other Income . . . . . . . . . . . . . . . . . Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 40 . . . . . . . . . 17 Married Persons: Filing Joint Returns . . . . . . . . . . . Filing Separate Returns . . . . . . . . . Living Apart . . . . . . . . . . . . . . . . Medical and Dental Expenses . . . . . . . Mileage Rates, Standard . . . 11, A-1*, Miscellaneous Itemized Deductions . . . Mortgage Interest Credit . . . . . . . . . . Moving Expenses . . . . . . . . . . . . . . . . . . Qualified Dividends . . . . . . 20, 33-34, D-1*, D-2* Qualified Dividends and Capital Gain Tax Worksheet . . . . . . . . . . . . . . . . . 33-34 Qualified Retirement Plans — Deduction for . . . 30 Qualified Tuition Program Earnings . . . 11, 24, 39 H Head of Household . . . . . . . . . Health Insurance Deduction — Self-Employed . . Health Savings Accounts . . . . . . Help With Unresolved Tax Issues Home — Sale of . . . . . . . . . . . Household Employment Taxes . . Presidential Election $3 Check-Off Private Delivery Services . . . . . . Public Debt — Gift To Reduce the . Publications — How To Get . . . . . 24, A-6* . . . A-4* . . . . 40 G I C Farm Income and Expenses (Schedule F) . Farm Income Averaging (Schedule J) . . . Fee-Basis Government Officials, Expenses of . . . . . . . . . . . . . . . . . Filing Requirements . . . . . . . . . . . . . . Filing Status — Which Box To Check . . . Foreign Accounts and Trusts . . . . . . . . Foreign Tax Credit . . . . . . . . . . . Foreign-Source Income . . . . . . . . . Form W-2 . . . . . . . . . . . . . . . . . Forms W-2, 1098, and 1099 — Where Report Certain Items From . . . . . Forms — How To Get . . . . . . . . . . . . . . . . . . . . . . . . . 54 . 73 B-2* . 24 39-40 P Partnership Expenses — Unreimbursed . . . . . E-6* Partnerships . . . . . . . . . . . . . . . . . . E-5*, E-6* Passive Activity: Losses . . . . . . . . . . . . . . . . C-2*, E-1*, F-2* Material Participation . . . . . . . . . . C-2*, F-2* Payments . . . . . . . . . . . . . . . . . . . . . . 40-54 Penalty: Early Withdrawal of Savings . . . . . . . . . . . 30 Estimated Tax . . . . . . . . . . . . . . . . . . 55-56 Frivolous Return . . . . . . . . . . . . . . . . . . 59 Late Filing . . . . . . . . . . . . . . . . . . . . . . 59 Late Payment . . . . . . . . . . . . . . . . . . . . 59 Other . . . . . . . . . . . . . . . . . . . . . . . . . 59 Pensions and Annuities . . . . . . . . . . . . . . 22-24 Performing Artists, Expenses of . . . . . . . . 11, 26 Railroad Retirement Benefits: Treated as a Pension . . . . . . . . . . . . . . . . 22 Treated as Social Security . . . . . . . . . . . . 24 Records — How Long To Keep . . . . . . . . . . . 58 Refund . . . . . . . . . . . . . . . . . . . . . . . . 54-55 Refund Information . . . . . . . . . . . . . . . . . . . 8 Refund Offset . . . . . . . . . . . . . . . . . . . . . . 54 Refunds, Credits, or Offsets of State and Local Income Taxes . . . . . . . . . . . . . . 20-21 Rental Income and Expenses (Schedule E) . . . E-2* Reservists, Expenses of . . . . . . . . . . . . . . 11, 26 Retirement Plan Deduction — Self-Employed . . 30 Retirement Savings Contributions Credit . . . . . 36 Rights of Taxpayers . . . . . . . . . . . . . . . . . . 57 Rollovers . . . . . . . . . . . . . . . . . . . . 22, 23-24 Roth IRAs . . . . . . . . . . . . . . . . . . . . . . 22, 26 Rounding Off to Whole Dollars . . . . . . . . . . 19 Royalties . . . . . . . . . . . . . . . . . . . . . . . . E-3* S S Corporations . . . . . . . . . . . . . . . . E-5*, E-6* Sale of Home . . . . . . . . . . . . . . . . . . . . . D-2* Scholarship and Fellowship Grants . . . . . . . . 19 Self-Employment Tax: Deduction for One-Half of . . . . . . . . . . . . 30 Income Subject to . . . . . . . . . . . . . . . SE-2* Signing Your Return . . . . . . . . . . . . . . . 56-57 Single Person . . . . . . . . . . . . . . . . . . . . . . 16 Social Security and Equivalent Railroad Retirement Benefits . . . . . . . . . . . . . . 24-25 Social Security Number . . . . . . . . . . . . . 16, 58 Standard Deduction or Itemized Deduction . . . . . . . . . . . . . . . . . . . . 31-32 State and Local Income Taxes — Taxable Refunds, Credits, or Offsets of . . . . . . . . 20-21 Statutory Employees . . . . . . . . . 19, C-3*, C-6* Student Loan Interest Deduction . . . . . . . . . . 28 T Tax and Credits . . . . . . . . . . . . . . . . . . 31-40 Figured by the IRS . . . . . . . . . . . . 33, 36, 44 Other Taxes: Alternative Minimum Tax . . . . . . . . . 35-36 IRAs and Other Tax-Favored Accounts . . . 39 Lump-Sum Distributions . . . . . . . . . . . . 24 Recapture . . . . . . . . . . . . . . . . . . . . . 40 Section 72(m)(5) . . . . . . . . . . . . . . . . . 40 Tax Computation Worksheet . . . . . . . . . . 11, 72 Tax Rate Schedules . . . . . . . . . . . . . . . . 11, 76 Tax Table . . . . . . . . . . . . . . . . . . . . . . 60-71 Taxes You Paid . . . . . . . . . . . . . . . . . . . A-2* Taxpayer Advocate — Office of . . . . . . . . . . . . 6 Teachers — Deduction for . . . . . . . . . . . . . . 26 Telephone Assistance: Federal Tax Information . . . . . . . . . . . . . 8-10 TeleTax . . . . . . . . . . . . . . . . . . . . . . . . 8-9 Third Party Designee . . . . . . . . . . . . . . . . . 56 Tip Income . . . . . . . . . . . . . . . . . . . . . 19, 39 Tips Reported to Employer — Uncollected Tax on . . . . . . . . . . . . . . . . . . . . . . . . 40 Trusts — Foreign . . . . . . . . . . . . . . . . . . . B-2* Tuition and Fees Deduction . . . . . . . . . . . 11, 29 Tuition Program Earnings . . . . . . . . . 11, 24, 39 U U.S. Citizens and Resident Aliens Living Abroad . . . . . . . . . . . . . . . . . . . . . . 12, 19 Unemployment Compensation . . . . . . . . . . . 24 W What if You Cannot Pay? . . . . . . . . . . . . 10, 55 When Should You File? . . . . . . . . . . . . . . . 12 Where Do You File? . . . . . . . . . 12, Back Cover Who Must File . . . . . . . . . . . . . . . . . . . 12, 13 Who Should File . . . . . . . . . . . . . . . . . . . . 12 Widows and Widowers, Qualifying . . . . . . . . 17 Winnings — Prizes, Gambling, and Lotteries (Other Income) . . . . . . . . . . . . . . . . . . . 24 Withholding — Federal Income Tax . . . . . . 40, 57 * These items may not be included in this package. To reduce printing costs, we have sent you only the forms you may need based on what you filed last year. 4 I.R.S. SPECIFICATIONS TO BE REMOVED BEFORE PRINTING INSTRUCTIONS TO PRINTERS PACKAGE 1040-OTC, FOLIO 132 OF 132 MARGINS; TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD PAPER: WHITE WRITING, SUB. 20. INK: BLACK FLAT SIZE: 216mm (81⁄2 ") x 279mm (11") PERFORATE: ON FOLD DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT Layer 1 Color=Solid Black Where Do You File? If an envelope addressed to “Internal Revenue Service Center” came with this booklet, please use it. If you do not have one or if you moved during the year, mail your return to the Internal Revenue Service Center shown that applies to you. Envelopes without enough postage will be returned to you by the post office. Your envelope may need additional postage if it contains more than five pages or is oversized (for example, it is over 1⁄4 " thick). Also, include your complete return address. TIP THEN use this address if you: Are not enclosing a check or money order... IF you live in... Alabama, Florida, Georgia, Mississippi, North Carolina, Rhode Island, South Carolina, West Virginia Maine, Massachusetts, New Hampshire, New York, Vermont Connecticut, Delaware, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Wisconsin District of Columbia, Maryland, New Jersey, Pennsylvania Arkansas, Colorado, Kentucky, Louisiana, New Mexico, Oklahoma, Tennessee, Texas Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Virginia, Washington, Wyoming Ohio* All APO and FPO addresses, American Samoa, nonpermanent residents of Guam or the Virgin Islands**, Puerto Rico (or if excluding income under Internal Revenue Code section 933), dual-status aliens, a foreign country: U.S. citizens and those filing Form 2555, 2555-EZ, or 4563 Are enclosing a check or money order... Internal Revenue Service Center Atlanta, GA 39901-0002 Internal Revenue Service Center Andover, MA 05501-0002 Internal Revenue Service Center Kansas City, MO 64999-0002 Internal Revenue Service Center Philadelphia, PA 19255-0002 Internal Revenue Service Center Austin, TX 73301-0002 Internal Revenue Service Center Fresno, CA 93888-0002 Internal Revenue Service Center Memphis, TN 37501-0002 Internal Revenue Service Center Atlanta, GA 39901-0102 Internal Revenue Service Center Andover, MA 05501-0102 Internal Revenue Service Center Kansas City, MO 64999-0102 Internal Revenue Service Center Philadelphia, PA 19255-0102 Internal Revenue Service Center Austin, TX 73301-0102 Internal Revenue Service Center Fresno, CA 93888-0102 Internal Revenue Service Center Memphis, TN 37501-0102 Internal Revenue Service Center Philadelphia, PA 19255-0215 USA Internal Revenue Service Center Philadelphia, PA 19255-0215 USA * If you live in Ohio and file your return after June 30, 2005, use: Internal Revenue Service Center, Fresno, CA 93888-0002 (if you are not enclosing a check or money order); or Internal Revenue Service Center, Fresno, CA 93888-0102 (if you are enclosing a check or money order). ** Permanent residents of Guam should use: Department of Revenue and Taxation, Government of Guam, P.O. Box 23607, GMF, GU 96921; permanent residents of the Virgin Islands should use: V.I. Bureau of Internal Revenue, 9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802. What’s Inside? Instructions for Form 1040 IRS e-file and free file options (page 3) Commissioner’s message (page 2) Index (inside back cover) When to file (page 12) What’s new for 2004 (page 11) How to comment on forms (page 75) How to avoid common mistakes (page 57) Printed on recycled paper Help with unresolved tax issues (page 6) Free tax help (pages 7 and 58) How to get forms and publications (page 7) Tax table (page 60) How to make a gift to reduce debt held by the public (page 58)
Source Exif Data:
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