Tax Forms Guide - HowardSoft · Tax Preparer® Tax Forms Guide 2008 Edition (for preparing 2007...

by HowardSoft®®®®

Tax Preparer®®®®

Tax Forms Guide2008 Edition

(for preparing 2007 Form 1040 tax returnsand tax planning for 2008 and beyond)

For a friendlier environment, HowardSoft manuals are printed on recycled paper. We areproud to be among the first in the industry, several years ago, to take this importantstep to help conserve our forests, and encourage you do the same wherever you can.

This guide and the associated software are based on information compiled and inter-preted by the staff of HowardSoft in late 2007 and January 2008, including the latestinformation from the IRS, but their complete accuracy cannot be guaranteed. NeitherHowardSoft nor Dr. J. E. Howard assumes any responsibility for any consequentialdamages resulting from their use. All customers are bound by the Customer Agree-ments that are printed on the next page and the separate Disk Packet.

This guide and the associated software are copyrighted by HowardSoft and all rightsare reserved. This document may not, in whole or in part, be copied, photocopied, re-produced, translated, or reduced to any electronic medium or machine-readable formwithout prior written consent from Dr. J. E. Howard, President of HowardSoft.

Copyright 2008 by HowardSoftP. O. Box 8432, La Jolla, CA 92038

(HowardSoft® and Tax Preparer® are registered trademarks of HowardSoft.)

Customer Agreements

CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFOREOPENING THE DISK PACKET. OPENING THE DISK PACKET INDICATESYOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS. IF YOU DO NOTAGREE WITH THEM, YOU SHOULD PROMPTLY RETURN THE ENTIREPACKAGE WITH THE DISK PACKET UNOPENED, AND YOUR MONEY WILLBE REFUNDED. HowardSoft provides this program and licenses its use in theUnited States and Puerto Rico. You assume responsibility for the selection ofthe program to achieve your intended results, and for the installation, use,and results obtained from the program.

License. You may1. use the program on any machine that you personally own and use, and2. copy the program into any machine-readable or printed form for backup

support of your use of the program on the machine.YOU MAY NOT USE, COPY, MODIFY, SUBLICENSE OR OTHERWISETRANSFER THE PROGRAM OR ANY COPY, MODIFICATION OR MERGEDPORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY PROVIDED FORIN THIS LICENSE. IF YOU TRANSFER POSSESSION OF ANY COPY,MODIFICATION OR MERGED PORTION OF THE PROGRAM TO ANOTHERPARTY, YOUR LICENSE IS AUTOMATICALLY TERMINATED AND ANYATTEMPTED SUBLICENSE, ASSIGNMENT OR OTHER TRANSFER IS NULLAND VOID.

Term. The license is effective until terminated. You may terminate it at anytime by destroying the program, together with all copies, modifications andmerged portions in any form. It will also terminate upon conditions set forthelsewhere in this Agreement or if you fail to comply with any term or condi-tion of this Agreement. You agree upon such termination to destroy the pro-gram together with all copies, modifications and merged portions in any form.

Limited Warranty. This program is intended only as a computational aid andnot a professional advisor. HowardSoft does not represent itself as a tax, in-vestment, or legal advisor and is not responsible for decisions made on thebasis of data produced by the program. THE PROGRAM IS PROVIDED "ASIS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED,INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OFMERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THEENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE PROGRAMIS WITH YOU. SHOULD THE PROGRAM PROVE DEFECTIVE, YOU (AND NOTHOWARDSOFT NOR ITS REPRESENTATIVE) ASSUME THE ENTIRE COST OFALL NECESSARY SERVICING, REPAIR OR CORRECTION. SOME STATES DONOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVEEXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOUSPECIFIC LEGAL RIGHTS AND YOU MAY ALSO HAVE OTHER RIGHTSWHICH VARY FROM STATE TO STATE. HowardSoft does not warrant thatthe functions contained in the program will meet your requirements nor thatthe operation of the program will be uninterrupted or error free. However,HowardSoft does warrant the diskette on which the program is furnished to

HowardSoft

be free from defects in materials and workmanship under normal use for a pe-riod of ninety (90) days from the date of delivery to you as evidenced by acopy of your receipt.

Limitations of Remedies. HowardSoft's entire liability and your exclusiveremedy shall be:

1. the replacement of any diskette not meeting HowardSoft's warrantydescribed above and which is returned to HowardSoft with a copy ofyour payment receipt, or

2. if HowardSoft is unable to deliver a replacement diskette which is freeof defects in material or workmanship, you may terminate this Agree-ment by returning the program and your money will be refunded.

IN NO EVENT WILL HOWARDSOFT BE LIABLE TO YOU FOR ANY DAMAGES,INCLUDING ANY LOST PROFITS, LOST SAVINGS, OR OTHER INCIDENTALOR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OR INABILITYTO USE SUCH PROGRAM EVEN IF HOWARDSOFT HAS BEEN ADVISED OFTHE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANYOTHER PARTY. SOME STATES DO NOT ALLOW THE LIMITATION OREXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIALDAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLYTO YOU.

General. The Agreement will be governed by the laws of the State of Califor-nia. Should you have any questions concerning this Agreement, you may con-tact HowardSoft in writing at P. O. Box 8432, La Jolla, California 92038.YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT,UNDERSTAND IT AND AGREE TO BE BOUND BY ITS TERMS ANDCONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE ANDEXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICHSUPERSEDES ANY PROPOSAL OR PRIOR AGREEMENT, ORAL OR WRITTEN,AND ANY OTHER COMMUNICATIONS BETWEEN US RELATING TO THESUBJECT MATTER OF THIS AGREEMENT.

* Included only in Premium Level software.** Included only in Standard and Premium Level software.

Contents-1

Table of Contents

HINT: For a clickable on-screen version of this table of contents, viewBookmarks. To search, press ctrl-F and enter the phrase you want tofind, then press ctrl-G to find other occurences.

IntroductionTax Forms Guide vs. User's GuideTax Forms Guide vs. User's GuideTax Forms Guide vs. User's GuideTax Forms Guide vs. User's Guide ............................................................................................................................................................................................................................ 1111Paperwork Reduction Act NoticePaperwork Reduction Act NoticePaperwork Reduction Act NoticePaperwork Reduction Act Notice ........................................................................................................................................................................................................................................ 2222

Chapter 1Highlights of Changes

OverviewOverviewOverviewOverview ........................................................................................................................................................................................................................................................................................................................................................................................................ 1111Form by Form ChangesForm by Form ChangesForm by Form ChangesForm by Form Changes .................................................................................................................................................................................................................................................................................................... 9999Printouts and Form 1040 Tab SettingsPrintouts and Form 1040 Tab SettingsPrintouts and Form 1040 Tab SettingsPrintouts and Form 1040 Tab Settings........................................................................................................................................................................................................ 1111Recommended IRS PublicationsRecommended IRS PublicationsRecommended IRS PublicationsRecommended IRS Publications ........................................................................................................................................................................................................................................ 4444

Chapter 2Form by Form Details

How to Use This ChapterHow to Use This ChapterHow to Use This ChapterHow to Use This Chapter ............................................................................................................................................................................................................................................................................................ 1111Where to Report Income and DeductionsWhere to Report Income and DeductionsWhere to Report Income and DeductionsWhere to Report Income and Deductions................................................................................................................................................................................ 3333Control FormControl FormControl FormControl Form ............................................................................................................................................................................................................................................................................................................................................................................ 6666Form 1040 / Main FormForm 1040 / Main FormForm 1040 / Main FormForm 1040 / Main Form.................................................................................................................................................................................................................................................................................................... 16161616Schedule A / Itemized DeductionsSchedule A / Itemized DeductionsSchedule A / Itemized DeductionsSchedule A / Itemized Deductions........................................................................................................................................................................................................................ 85858585Schedule B / Interest and Dividend IncomeSchedule B / Interest and Dividend IncomeSchedule B / Interest and Dividend IncomeSchedule B / Interest and Dividend Income ................................................................................................................................................ 104104104104Schedule C & C-EZ / Profit or Loss from BusinessSchedule C & C-EZ / Profit or Loss from BusinessSchedule C & C-EZ / Profit or Loss from BusinessSchedule C & C-EZ / Profit or Loss from Business........................................................................................................ 114114114114Schedule D / Capital Gains and LossesSchedule D / Capital Gains and LossesSchedule D / Capital Gains and LossesSchedule D / Capital Gains and Losses ........................................................................................................................................................................ 127127127127Schedule E / Supplemental Income and LossSchedule E / Supplemental Income and LossSchedule E / Supplemental Income and LossSchedule E / Supplemental Income and Loss ................................................................................................................................ 148148148148Schedule EIC / Earned Income CreditSchedule EIC / Earned Income CreditSchedule EIC / Earned Income CreditSchedule EIC / Earned Income Credit .................................................................................................................................................................................... 171171171171Schedule F / Profit or Loss from FarmingSchedule F / Profit or Loss from FarmingSchedule F / Profit or Loss from FarmingSchedule F / Profit or Loss from Farming ................................................................................................................................................................ 176176176176Schedule H / Household Employment TaxesSchedule H / Household Employment TaxesSchedule H / Household Employment TaxesSchedule H / Household Employment Taxes ........................................................................................................................................ 187187187187Schedule J / Income Averaging for Farmers & FishermenSchedule J / Income Averaging for Farmers & FishermenSchedule J / Income Averaging for Farmers & FishermenSchedule J / Income Averaging for Farmers & Fishermen.................................................... 193193193193Schedule R / Credit for the Elderly or DisabledSchedule R / Credit for the Elderly or DisabledSchedule R / Credit for the Elderly or DisabledSchedule R / Credit for the Elderly or Disabled ........................................................................................................................ 201201201201Schedule SE / Self-Employment TaxSchedule SE / Self-Employment TaxSchedule SE / Self-Employment TaxSchedule SE / Self-Employment Tax ................................................................................................................................................................................................ 204204204204Form 1116** / Foreign Tax CreditForm 1116** / Foreign Tax CreditForm 1116** / Foreign Tax CreditForm 1116** / Foreign Tax Credit .................................................................................................................................................................................................................... 209209209209Form 1310* / Refund Due a Deceased TaxpayerForm 1310* / Refund Due a Deceased TaxpayerForm 1310* / Refund Due a Deceased TaxpayerForm 1310* / Refund Due a Deceased Taxpayer................................................................................................................ 227227227227Form 2106 & 2106-EZ / Employee Business ExpensesForm 2106 & 2106-EZ / Employee Business ExpensesForm 2106 & 2106-EZ / Employee Business ExpensesForm 2106 & 2106-EZ / Employee Business Expenses ................................................................................ 230230230230Form 2120* / Multiple Support DeclarationForm 2120* / Multiple Support DeclarationForm 2120* / Multiple Support DeclarationForm 2120* / Multiple Support Declaration .................................................................................................................................................... 245245245245


Contents-2

Form 2210 & 2210-F / Underpayment of Estimated TaxForm 2210 & 2210-F / Underpayment of Estimated TaxForm 2210 & 2210-F / Underpayment of Estimated TaxForm 2210 & 2210-F / Underpayment of Estimated Tax ........................................................................ 247247247247Form 2350* / Application for Extension of Time to File U.S. IncomeForm 2350* / Application for Extension of Time to File U.S. IncomeForm 2350* / Application for Extension of Time to File U.S. IncomeForm 2350* / Application for Extension of Time to File U.S. IncomeTax ReturnTax ReturnTax ReturnTax Return................................................................................................................................................................................................................................................................................................................................................................................ 260260260260Form 2441 / Child and Dependent Care ExpensesForm 2441 / Child and Dependent Care ExpensesForm 2441 / Child and Dependent Care ExpensesForm 2441 / Child and Dependent Care Expenses.................................................................................................... 263263263263Form 2555 & 2555-EZ* / Foreign Earned IncomeForm 2555 & 2555-EZ* / Foreign Earned IncomeForm 2555 & 2555-EZ* / Foreign Earned IncomeForm 2555 & 2555-EZ* / Foreign Earned Income ................................................................................................................ 277277277277Form 2848* / Power of Attorney & Declaration of RepresentativeForm 2848* / Power of Attorney & Declaration of RepresentativeForm 2848* / Power of Attorney & Declaration of RepresentativeForm 2848* / Power of Attorney & Declaration of Representative.... 289289289289Form 3468 / Investment CreditForm 3468 / Investment CreditForm 3468 / Investment CreditForm 3468 / Investment Credit ............................................................................................................................................................................................................................................ 292292292292Form 3800 / General Business CreditForm 3800 / General Business CreditForm 3800 / General Business CreditForm 3800 / General Business Credit ............................................................................................................................................................................................ 297297297297Form 3903 / Moving ExpensesForm 3903 / Moving ExpensesForm 3903 / Moving ExpensesForm 3903 / Moving Expenses ............................................................................................................................................................................................................................................ 302302302302Form 4136* / Credit for Federal Tax Paid on FuelsForm 4136* / Credit for Federal Tax Paid on FuelsForm 4136* / Credit for Federal Tax Paid on FuelsForm 4136* / Credit for Federal Tax Paid on Fuels.................................................................................................... 305305305305Form 4137* / Social Security and Medicare Tax on Unreported TipForm 4137* / Social Security and Medicare Tax on Unreported TipForm 4137* / Social Security and Medicare Tax on Unreported TipForm 4137* / Social Security and Medicare Tax on Unreported TipIncomeIncomeIncomeIncome........................................................................................................................................................................................................................................................................................................................................................................................................ 321321321321Form 4255* / Recapture of Investment CreditForm 4255* / Recapture of Investment CreditForm 4255* / Recapture of Investment CreditForm 4255* / Recapture of Investment Credit .................................................................................................................................... 325325325325Form 4562 / Depreciation and AmortizationForm 4562 / Depreciation and AmortizationForm 4562 / Depreciation and AmortizationForm 4562 / Depreciation and Amortization ................................................................................................................................................ 327327327327Form 4684 / Casualties and TheftsForm 4684 / Casualties and TheftsForm 4684 / Casualties and TheftsForm 4684 / Casualties and Thefts................................................................................................................................................................................................................ 361361361361Form 4797 / Sales of Business PropertyForm 4797 / Sales of Business PropertyForm 4797 / Sales of Business PropertyForm 4797 / Sales of Business Property ............................................................................................................................................................................ 370370370370Form 4835 / Farm Rental Income and ExpensesForm 4835 / Farm Rental Income and ExpensesForm 4835 / Farm Rental Income and ExpensesForm 4835 / Farm Rental Income and Expenses.................................................................................................................... 393393393393Form 4868 / Automatic Extension of Time to FileForm 4868 / Automatic Extension of Time to FileForm 4868 / Automatic Extension of Time to FileForm 4868 / Automatic Extension of Time to File.................................................................................................................... 397397397397Form 4952** / Investment Interest Expense DeductionForm 4952** / Investment Interest Expense DeductionForm 4952** / Investment Interest Expense DeductionForm 4952** / Investment Interest Expense Deduction ........................................................................ 400400400400Form 4970* / Tax on Accumulation Distribution of TrustsForm 4970* / Tax on Accumulation Distribution of TrustsForm 4970* / Tax on Accumulation Distribution of TrustsForm 4970* / Tax on Accumulation Distribution of Trusts ........................................................ 406406406406Form 4972* / Tax on Lump-Sum DistributionsForm 4972* / Tax on Lump-Sum DistributionsForm 4972* / Tax on Lump-Sum DistributionsForm 4972* / Tax on Lump-Sum Distributions .................................................................................................................................... 415415415415Form 5329 / Additional Tax on Qualified Plans (IRAs, etc.)Form 5329 / Additional Tax on Qualified Plans (IRAs, etc.)Form 5329 / Additional Tax on Qualified Plans (IRAs, etc.)Form 5329 / Additional Tax on Qualified Plans (IRAs, etc.)................................................ 420420420420Form 5695** / Residential Energy CreditsForm 5695** / Residential Energy CreditsForm 5695** / Residential Energy CreditsForm 5695** / Residential Energy Credits ............................................................................................................................................................ 434434434434Form 5884* / Work Opportunity CreditForm 5884* / Work Opportunity CreditForm 5884* / Work Opportunity CreditForm 5884* / Work Opportunity Credit .................................................................................................................................................................................... 441441441441Form 6198* / At-Risk LimitationsForm 6198* / At-Risk LimitationsForm 6198* / At-Risk LimitationsForm 6198* / At-Risk Limitations ............................................................................................................................................................................................................................ 445445445445Form 6251 / Alternative Minimum TaxForm 6251 / Alternative Minimum TaxForm 6251 / Alternative Minimum TaxForm 6251 / Alternative Minimum Tax ........................................................................................................................................................................................ 450450450450Form 6252 / Installment Sale IncomeForm 6252 / Installment Sale IncomeForm 6252 / Installment Sale IncomeForm 6252 / Installment Sale Income ............................................................................................................................................................................................ 458458458458Form 6478* / Credit for Alcohol Used as FuelForm 6478* / Credit for Alcohol Used as FuelForm 6478* / Credit for Alcohol Used as FuelForm 6478* / Credit for Alcohol Used as Fuel .................................................................................................................................... 466466466466Form 6765* / Credit for Increasing ResearchForm 6765* / Credit for Increasing ResearchForm 6765* / Credit for Increasing ResearchForm 6765* / Credit for Increasing Research........................................................................................................................................ 471471471471Form 6781* / Gains and Losses from Section 1256 Contracts andForm 6781* / Gains and Losses from Section 1256 Contracts andForm 6781* / Gains and Losses from Section 1256 Contracts andForm 6781* / Gains and Losses from Section 1256 Contracts andStraddlesStraddlesStraddlesStraddles........................................................................................................................................................................................................................................................................................................................................................................................ 480480480480Form 8271* / Investor Reporting of Tax Shelter Registration NumberForm 8271* / Investor Reporting of Tax Shelter Registration NumberForm 8271* / Investor Reporting of Tax Shelter Registration NumberForm 8271* / Investor Reporting of Tax Shelter Registration Number............................................................................................................................................................................................................................................................................................................................................................................................................................................................ 488488488488Form 8283 / Noncash Charitable ContributionsForm 8283 / Noncash Charitable ContributionsForm 8283 / Noncash Charitable ContributionsForm 8283 / Noncash Charitable Contributions ........................................................................................................................ 489489489489Form 8332* / Release of Claim to Exemption for Child of DivorcedForm 8332* / Release of Claim to Exemption for Child of DivorcedForm 8332* / Release of Claim to Exemption for Child of DivorcedForm 8332* / Release of Claim to Exemption for Child of Divorcedor Separated Parentsor Separated Parentsor Separated Parentsor Separated Parents .................................................................................................................................................................................................................................................................................................... 490490490490Form 8379* / Injured Spouse Claim and AllocationForm 8379* / Injured Spouse Claim and AllocationForm 8379* / Injured Spouse Claim and AllocationForm 8379* / Injured Spouse Claim and Allocation................................................................................................ 492492492492Form 8396* / Mortgage Interest CreditForm 8396* / Mortgage Interest CreditForm 8396* / Mortgage Interest CreditForm 8396* / Mortgage Interest Credit.................................................................................................................................................................................... 499499499499Form 8582 / Passive Activity Loss LimitationsForm 8582 / Passive Activity Loss LimitationsForm 8582 / Passive Activity Loss LimitationsForm 8582 / Passive Activity Loss Limitations ........................................................................................................................................ 504504504504Form 8586* / Low-Income Housing CreditForm 8586* / Low-Income Housing CreditForm 8586* / Low-Income Housing CreditForm 8586* / Low-Income Housing Credit ............................................................................................................................................................ 513513513513


Contents-3

Form 8594* / Form 8594* / Form 8594* / Form 8594* / Asset Acquisition Statement Under Section 1060Asset Acquisition Statement Under Section 1060Asset Acquisition Statement Under Section 1060Asset Acquisition Statement Under Section 1060 ........................ 515515515515Form 8606 / Nondeductible IRAsForm 8606 / Nondeductible IRAsForm 8606 / Nondeductible IRAsForm 8606 / Nondeductible IRAs ............................................................................................................................................................................................................................ 519519519519Form 8611* / Recapture of Low-Income Housing CreditForm 8611* / Recapture of Low-Income Housing CreditForm 8611* / Recapture of Low-Income Housing CreditForm 8611* / Recapture of Low-Income Housing Credit................................................................ 531531531531Form 8615 / Tax for Children Under Age 18Form 8615 / Tax for Children Under Age 18Form 8615 / Tax for Children Under Age 18Form 8615 / Tax for Children Under Age 18.................................................................................................................................................... 535535535535Form 8801* / Credit for Prior Year Minimum TaxForm 8801* / Credit for Prior Year Minimum TaxForm 8801* / Credit for Prior Year Minimum TaxForm 8801* / Credit for Prior Year Minimum Tax................................................................................................................ 542542542542Form 8812 / Additional Child Tax CreditForm 8812 / Additional Child Tax CreditForm 8812 / Additional Child Tax CreditForm 8812 / Additional Child Tax Credit ........................................................................................................................................................................ 551551551551Form 8814 / Election to Report Child's Interest and DividendsForm 8814 / Election to Report Child's Interest and DividendsForm 8814 / Election to Report Child's Interest and DividendsForm 8814 / Election to Report Child's Interest and Dividends ........................................................ 555555555555Form 8815* / Exclusion of Interest from Series EE and I U.S. SavingsForm 8815* / Exclusion of Interest from Series EE and I U.S. SavingsForm 8815* / Exclusion of Interest from Series EE and I U.S. SavingsForm 8815* / Exclusion of Interest from Series EE and I U.S. SavingsBonds Issued After 1989Bonds Issued After 1989Bonds Issued After 1989Bonds Issued After 1989 .................................................................................................................................................................................................................................................................................... 560560560560Form 8822* / Change of AddressForm 8822* / Change of AddressForm 8822* / Change of AddressForm 8822* / Change of Address ........................................................................................................................................................................................................................ 564564564564Form 8824* / Like-Kind ExchangesForm 8824* / Like-Kind ExchangesForm 8824* / Like-Kind ExchangesForm 8824* / Like-Kind Exchanges ............................................................................................................................................................................................................ 566566566566Form 8828* / Recapture of Federal Mortgage SubsidyForm 8828* / Recapture of Federal Mortgage SubsidyForm 8828* / Recapture of Federal Mortgage SubsidyForm 8828* / Recapture of Federal Mortgage Subsidy .................................................................... 572572572572Form 8829 / Business Use of Your HomeForm 8829 / Business Use of Your HomeForm 8829 / Business Use of Your HomeForm 8829 / Business Use of Your Home........................................................................................................................................................................ 577577577577Form 8834* / Qualified Electric Vehicle CreditForm 8834* / Qualified Electric Vehicle CreditForm 8834* / Qualified Electric Vehicle CreditForm 8834* / Qualified Electric Vehicle Credit................................................................................................................................ 583583583583Form 8839* / Qualified Adoption ExpensesForm 8839* / Qualified Adoption ExpensesForm 8839* / Qualified Adoption ExpensesForm 8839* / Qualified Adoption Expenses .................................................................................................................................................... 586586586586Form 8846* / Credit for Employer Social Security and MedicareForm 8846* / Credit for Employer Social Security and MedicareForm 8846* / Credit for Employer Social Security and MedicareForm 8846* / Credit for Employer Social Security and MedicareTaxes Paid on Certain Employee TipsTaxes Paid on Certain Employee TipsTaxes Paid on Certain Employee TipsTaxes Paid on Certain Employee Tips .................................................................................................................................................................................... 600600600600Form 8853* / Archer MSAs and Long-Term Care InsuranceForm 8853* / Archer MSAs and Long-Term Care InsuranceForm 8853* / Archer MSAs and Long-Term Care InsuranceForm 8853* / Archer MSAs and Long-Term Care InsuranceContractsContractsContractsContracts .................................................................................................................................................................................................................................................................................................................................................................................... 604604604604Form 8859* / District of Columbia First-Time Homebuyer CreditForm 8859* / District of Columbia First-Time Homebuyer CreditForm 8859* / District of Columbia First-Time Homebuyer CreditForm 8859* / District of Columbia First-Time Homebuyer Credit .... 616616616616Form 8861* / Welfare-to-Work CreditForm 8861* / Welfare-to-Work CreditForm 8861* / Welfare-to-Work CreditForm 8861* / Welfare-to-Work Credit ............................................................................................................................................................................................ 619619619619Form 8862* / Information to Claim Earned Income Credit AfterForm 8862* / Information to Claim Earned Income Credit AfterForm 8862* / Information to Claim Earned Income Credit AfterForm 8862* / Information to Claim Earned Income Credit AfterDisallowanceDisallowanceDisallowanceDisallowance ............................................................................................................................................................................................................................................................................................................................................................ 621621621621Form 8863 / Education CreditsForm 8863 / Education CreditsForm 8863 / Education CreditsForm 8863 / Education Credits ........................................................................................................................................................................................................................................ 626626626626Form 8880 / Qualified Retirement Savings Contributions CreditForm 8880 / Qualified Retirement Savings Contributions CreditForm 8880 / Qualified Retirement Savings Contributions CreditForm 8880 / Qualified Retirement Savings Contributions Credit ........ 630630630630Form 8885* / Health Coverage Tax CreditForm 8885* / Health Coverage Tax CreditForm 8885* / Health Coverage Tax CreditForm 8885* / Health Coverage Tax Credit............................................................................................................................................................ 632632632632Form 8889* / Health Savings Accounts (HSAs)Form 8889* / Health Savings Accounts (HSAs)Form 8889* / Health Savings Accounts (HSAs)Form 8889* / Health Savings Accounts (HSAs) ............................................................................................................................ 634634634634Form 8901 / Information on Qualifying Children Who Are NotForm 8901 / Information on Qualifying Children Who Are NotForm 8901 / Information on Qualifying Children Who Are NotForm 8901 / Information on Qualifying Children Who Are NotDependentsDependentsDependentsDependents .................................................................................................................................................................................................................................................................................................................................................................... 643643643643Form 8910** / Alternative Motor Vehicle CreditForm 8910** / Alternative Motor Vehicle CreditForm 8910** / Alternative Motor Vehicle CreditForm 8910** / Alternative Motor Vehicle Credit ........................................................................................................................ 644644644644Form 8917 / Tuition and Fees DeductionForm 8917 / Tuition and Fees DeductionForm 8917 / Tuition and Fees DeductionForm 8917 / Tuition and Fees Deduction........................................................................................................................................................................ 649649649649Schedule D Tax WorksheetSchedule D Tax WorksheetSchedule D Tax WorksheetSchedule D Tax Worksheet ............................................................................................................................................................................................................................................................ 652652652652Form 1040-ES / Estimated Tax for IndividualsForm 1040-ES / Estimated Tax for IndividualsForm 1040-ES / Estimated Tax for IndividualsForm 1040-ES / Estimated Tax for Individuals .................................................................................................................................... 653653653653Form 1040X / Amended Income Tax ReturnForm 1040X / Amended Income Tax ReturnForm 1040X / Amended Income Tax ReturnForm 1040X / Amended Income Tax Return ................................................................................................................................................ 655655655655e-filee-filee-filee-file form** / Form 8453, 8879, etc. form** / Form 8453, 8879, etc. form** / Form 8453, 8879, etc. form** / Form 8453, 8879, etc. ........................................................................................................................................................................................................ 657657657657RAL or QIK** / Bank ApplicationRAL or QIK** / Bank ApplicationRAL or QIK** / Bank ApplicationRAL or QIK** / Bank Application ........................................................................................................................................................................................................................ 670670670670

Chapter 3Laser and Windows Graphic Printing

What Is RequiredWhat Is RequiredWhat Is RequiredWhat Is Required ................................................................................................................................................................................................................................................................................................................................................ 1111


Contents-4

How to InstallHow to InstallHow to InstallHow to Install ............................................................................................................................................................................................................................................................................................................................................................................ 3333Operating HintsOperating HintsOperating HintsOperating Hints............................................................................................................................................................................................................................................................................................................................................................ 5555If You Have TroubleIf You Have TroubleIf You Have TroubleIf You Have Trouble ................................................................................................................................................................................................................................................................................................................................ 8888

Chapter 4Electronic Filing (e-file)

The BasicsThe BasicsThe BasicsThe Basics................................................................................................................................................................................................................................................................................................................................................................................................ 1111How to InstallHow to InstallHow to InstallHow to Install ............................................................................................................................................................................................................................................................................................................................................................................ 2222Operating HintsOperating HintsOperating HintsOperating Hints............................................................................................................................................................................................................................................................................................................................................................ 4444If You Have TroubleIf You Have TroubleIf You Have TroubleIf You Have Trouble ................................................................................................................................................................................................................................................................................................................................ 7777

List of FiguresFigure 1-1. Tabs for ALL HowardSoft forms: Facsimile, Laser-Figure 1-1. Tabs for ALL HowardSoft forms: Facsimile, Laser-Figure 1-1. Tabs for ALL HowardSoft forms: Facsimile, Laser-Figure 1-1. Tabs for ALL HowardSoft forms: Facsimile, Laser-

graphic, and Windows-graphic Form 1040graphic, and Windows-graphic Form 1040graphic, and Windows-graphic Form 1040graphic, and Windows-graphic Form 1040 ................................................................................................................................................ 2222Figure 1-2. Tabs for IRS-printed Form 1040 ONLYFigure 1-2. Tabs for IRS-printed Form 1040 ONLYFigure 1-2. Tabs for IRS-printed Form 1040 ONLYFigure 1-2. Tabs for IRS-printed Form 1040 ONLY ........................................................................................................................ 3333Figure 1-3. Tabs for IRS-printed Form 1040 AlternateFigure 1-3. Tabs for IRS-printed Form 1040 AlternateFigure 1-3. Tabs for IRS-printed Form 1040 AlternateFigure 1-3. Tabs for IRS-printed Form 1040 Alternate ................................................................................................ 3333Figure 2-1. Optional Text for LettersFigure 2-1. Optional Text for LettersFigure 2-1. Optional Text for LettersFigure 2-1. Optional Text for Letters ........................................................................................................................................................................................................ 14141414Figure 2-2. Dependents' WorksheetFigure 2-2. Dependents' WorksheetFigure 2-2. Dependents' WorksheetFigure 2-2. Dependents' Worksheet ................................................................................................................................................................................................................ 26262626Figure 2-3a. W-2 Worksheet, Screen 1Figure 2-3a. W-2 Worksheet, Screen 1Figure 2-3a. W-2 Worksheet, Screen 1Figure 2-3a. W-2 Worksheet, Screen 1 ........................................................................................................................................................................................ 31313131Figure 2-3b. W-2 Worksheet, Screen 2Figure 2-3b. W-2 Worksheet, Screen 2Figure 2-3b. W-2 Worksheet, Screen 2Figure 2-3b. W-2 Worksheet, Screen 2 ........................................................................................................................................................................................ 32323232Figure 2-3c. W-2 Worksheet, Screen 3Figure 2-3c. W-2 Worksheet, Screen 3Figure 2-3c. W-2 Worksheet, Screen 3Figure 2-3c. W-2 Worksheet, Screen 3 ........................................................................................................................................................................................ 34343434Figure 2-3d. W-2 Worksheet, Screen 4Figure 2-3d. W-2 Worksheet, Screen 4Figure 2-3d. W-2 Worksheet, Screen 4Figure 2-3d. W-2 Worksheet, Screen 4 ........................................................................................................................................................................................ 35353535Figure 2-3e. W-2 Worksheet, Screen 5Figure 2-3e. W-2 Worksheet, Screen 5Figure 2-3e. W-2 Worksheet, Screen 5Figure 2-3e. W-2 Worksheet, Screen 5 ........................................................................................................................................................................................ 37373737Figure 2-4a. 1099-R Worksheet, Screen 1Figure 2-4a. 1099-R Worksheet, Screen 1Figure 2-4a. 1099-R Worksheet, Screen 1Figure 2-4a. 1099-R Worksheet, Screen 1 ........................................................................................................................................................................ 42424242Figure 2-4b. 1099-R Worksheet, Screen 2Figure 2-4b. 1099-R Worksheet, Screen 2Figure 2-4b. 1099-R Worksheet, Screen 2Figure 2-4b. 1099-R Worksheet, Screen 2 ........................................................................................................................................................................ 44444444Figure 2-4c. 1099-R Worksheet, Screen 3Figure 2-4c. 1099-R Worksheet, Screen 3Figure 2-4c. 1099-R Worksheet, Screen 3Figure 2-4c. 1099-R Worksheet, Screen 3........................................................................................................................................................................ 47474747Figure 2-5a. W-2G Worksheet, Screen 1Figure 2-5a. W-2G Worksheet, Screen 1Figure 2-5a. W-2G Worksheet, Screen 1Figure 2-5a. W-2G Worksheet, Screen 1 ................................................................................................................................................................................ 52525252Figure 2-5b. W-2G Worksheet, Screen 2Figure 2-5b. W-2G Worksheet, Screen 2Figure 2-5b. W-2G Worksheet, Screen 2Figure 2-5b. W-2G Worksheet, Screen 2 ................................................................................................................................................................................ 53535353Figure 2-6. Sales Tax WorksheetFigure 2-6. Sales Tax WorksheetFigure 2-6. Sales Tax WorksheetFigure 2-6. Sales Tax Worksheet ............................................................................................................................................................................................................................ 92929292Figure 2-7. Mortgage Interest WorksheetFigure 2-7. Mortgage Interest WorksheetFigure 2-7. Mortgage Interest WorksheetFigure 2-7. Mortgage Interest Worksheet .................................................................................................................................................................... 97979797Figure 2-8. Seller-Financed WorksheetFigure 2-8. Seller-Financed WorksheetFigure 2-8. Seller-Financed WorksheetFigure 2-8. Seller-Financed Worksheet ............................................................................................................................................................................ 106106106106Figure 2-9. 1099-INT WorksheetFigure 2-9. 1099-INT WorksheetFigure 2-9. 1099-INT WorksheetFigure 2-9. 1099-INT Worksheet................................................................................................................................................................................................................................ 106106106106Figure 2-10. 1099-DIV WorksheetFigure 2-10. 1099-DIV WorksheetFigure 2-10. 1099-DIV WorksheetFigure 2-10. 1099-DIV Worksheet........................................................................................................................................................................................................................ 110110110110Figure 2-11a. Short-term Gain/Loss WorksheetFigure 2-11a. Short-term Gain/Loss WorksheetFigure 2-11a. Short-term Gain/Loss WorksheetFigure 2-11a. Short-term Gain/Loss Worksheet .................................................................................................................... 129129129129Figure 2-11b. Long-term Gain/Loss WorksheetFigure 2-11b. Long-term Gain/Loss WorksheetFigure 2-11b. Long-term Gain/Loss WorksheetFigure 2-11b. Long-term Gain/Loss Worksheet ........................................................................................................................ 130130130130Figure 2-12. Schedule K-1 Gain/Loss WorksheetFigure 2-12. Schedule K-1 Gain/Loss WorksheetFigure 2-12. Schedule K-1 Gain/Loss WorksheetFigure 2-12. Schedule K-1 Gain/Loss Worksheet ............................................................................................................ 134134134134Figure 2-13a. Rental/Royalty Worksheet, Screen 1Figure 2-13a. Rental/Royalty Worksheet, Screen 1Figure 2-13a. Rental/Royalty Worksheet, Screen 1Figure 2-13a. Rental/Royalty Worksheet, Screen 1 ................................................................................................ 151151151151Figure 2-13b. Rental/Royalty Worksheet, Screen 2Figure 2-13b. Rental/Royalty Worksheet, Screen 2Figure 2-13b. Rental/Royalty Worksheet, Screen 2Figure 2-13b. Rental/Royalty Worksheet, Screen 2 ................................................................................................ 153153153153Figure 2-14. Partnerships and S Corps WorksheetFigure 2-14. Partnerships and S Corps WorksheetFigure 2-14. Partnerships and S Corps WorksheetFigure 2-14. Partnerships and S Corps Worksheet.................................................................................................... 159159159159Figure 2-15. Estates and Trusts WorksheetFigure 2-15. Estates and Trusts WorksheetFigure 2-15. Estates and Trusts WorksheetFigure 2-15. Estates and Trusts Worksheet........................................................................................................................................................ 164164164164


Contents-5

Figure 2-16. REMICs WorksheetFigure 2-16. REMICs WorksheetFigure 2-16. REMICs WorksheetFigure 2-16. REMICs Worksheet................................................................................................................................................................................................................................ 168168168168Figure 2-17. State Fund Contributions WorksheetFigure 2-17. State Fund Contributions WorksheetFigure 2-17. State Fund Contributions WorksheetFigure 2-17. State Fund Contributions Worksheet ........................................................................................................ 191191191191Figure 2-18a. Foreign Source Worksheet, Screen 1Figure 2-18a. Foreign Source Worksheet, Screen 1Figure 2-18a. Foreign Source Worksheet, Screen 1Figure 2-18a. Foreign Source Worksheet, Screen 1 ............................................................................................ 219219219219Figure 2-18b. Foreign Source Worksheet, Screen 2Figure 2-18b. Foreign Source Worksheet, Screen 2Figure 2-18b. Foreign Source Worksheet, Screen 2Figure 2-18b. Foreign Source Worksheet, Screen 2 ............................................................................................ 221221221221Figure 2-19a. Vehicle Expense Worksheet, Screen 1Figure 2-19a. Vehicle Expense Worksheet, Screen 1Figure 2-19a. Vehicle Expense Worksheet, Screen 1Figure 2-19a. Vehicle Expense Worksheet, Screen 1 .................................................................................... 238238238238Figure 2-19b. Vehicle Expense Worksheet, Screen 2Figure 2-19b. Vehicle Expense Worksheet, Screen 2Figure 2-19b. Vehicle Expense Worksheet, Screen 2Figure 2-19b. Vehicle Expense Worksheet, Screen 2 .................................................................................... 241241241241Figure 2-20. Eligible Person WorksheetFigure 2-20. Eligible Person WorksheetFigure 2-20. Eligible Person WorksheetFigure 2-20. Eligible Person Worksheet ............................................................................................................................................................................ 246246246246Figure 2-21. Care Provider WorksheetFigure 2-21. Care Provider WorksheetFigure 2-21. Care Provider WorksheetFigure 2-21. Care Provider Worksheet .................................................................................................................................................................................... 268268268268Figure 2-22. Qualifying Person WorksheetFigure 2-22. Qualifying Person WorksheetFigure 2-22. Qualifying Person WorksheetFigure 2-22. Qualifying Person Worksheet ........................................................................................................................................................ 270270270270Figure 2-23. Prior-Year Qualifying Person WorksheetFigure 2-23. Prior-Year Qualifying Person WorksheetFigure 2-23. Prior-Year Qualifying Person WorksheetFigure 2-23. Prior-Year Qualifying Person Worksheet................................................................................ 274274274274Figure 2-24. Tax Home WorksheetFigure 2-24. Tax Home WorksheetFigure 2-24. Tax Home WorksheetFigure 2-24. Tax Home Worksheet ................................................................................................................................................................................................................ 280280280280Figure 2-25. U.S. Income WorksheetFigure 2-25. U.S. Income WorksheetFigure 2-25. U.S. Income WorksheetFigure 2-25. U.S. Income Worksheet ................................................................................................................................................................................................ 281281281281Figure 2-26. U.S. Home Maintained WorksheetFigure 2-26. U.S. Home Maintained WorksheetFigure 2-26. U.S. Home Maintained WorksheetFigure 2-26. U.S. Home Maintained Worksheet ........................................................................................................................ 282282282282Figure 2-27. Travel Abroad WorksheetFigure 2-27. Travel Abroad WorksheetFigure 2-27. Travel Abroad WorksheetFigure 2-27. Travel Abroad Worksheet.................................................................................................................................................................................... 283283283283Figure 2-28. Fuel Use WorksheetFigure 2-28. Fuel Use WorksheetFigure 2-28. Fuel Use WorksheetFigure 2-28. Fuel Use Worksheet ........................................................................................................................................................................................................................ 309309309309Figure 2-29. Fuel Sale WorksheetFigure 2-29. Fuel Sale WorksheetFigure 2-29. Fuel Sale WorksheetFigure 2-29. Fuel Sale Worksheet .................................................................................................................................................................................................................... 312312312312Figure 2-30. Unreported Tips WorksheetFigure 2-30. Unreported Tips WorksheetFigure 2-30. Unreported Tips WorksheetFigure 2-30. Unreported Tips Worksheet .................................................................................................................................................................... 322322322322Figure 2-31. ITC Recapture WorksheetFigure 2-31. ITC Recapture WorksheetFigure 2-31. ITC Recapture WorksheetFigure 2-31. ITC Recapture Worksheet ................................................................................................................................................................................ 325325325325Figure 2-32. Section 179 WorksheetFigure 2-32. Section 179 WorksheetFigure 2-32. Section 179 WorksheetFigure 2-32. Section 179 Worksheet.................................................................................................................................................................................................... 332332332332Figure 2-33. MACRS/ACRS WorksheetFigure 2-33. MACRS/ACRS WorksheetFigure 2-33. MACRS/ACRS WorksheetFigure 2-33. MACRS/ACRS Worksheet ................................................................................................................................................................................ 342342342342Figure 2-34. Sec. 168(f)(1) WorksheetFigure 2-34. Sec. 168(f)(1) WorksheetFigure 2-34. Sec. 168(f)(1) WorksheetFigure 2-34. Sec. 168(f)(1) Worksheet ........................................................................................................................................................................................ 346346346346Figure 2-35. Depreciation WorksheetFigure 2-35. Depreciation WorksheetFigure 2-35. Depreciation WorksheetFigure 2-35. Depreciation Worksheet ........................................................................................................................................................................................ 348348348348Figure 2-36. Listed Property WorksheetFigure 2-36. Listed Property WorksheetFigure 2-36. Listed Property WorksheetFigure 2-36. Listed Property Worksheet ............................................................................................................................................................................ 353353353353Figure 2-37. Vehicle Info WorksheetFigure 2-37. Vehicle Info WorksheetFigure 2-37. Vehicle Info WorksheetFigure 2-37. Vehicle Info Worksheet .................................................................................................................................................................................................... 356356356356Figure 2-38. Amortization WorksheetFigure 2-38. Amortization WorksheetFigure 2-38. Amortization WorksheetFigure 2-38. Amortization Worksheet ........................................................................................................................................................................................ 359359359359Figure 2-39. Casualty and Theft WorksheetFigure 2-39. Casualty and Theft WorksheetFigure 2-39. Casualty and Theft WorksheetFigure 2-39. Casualty and Theft Worksheet.................................................................................................................................................... 362362362362Figure 2-40. Casualty or Theft SummaryFigure 2-40. Casualty or Theft SummaryFigure 2-40. Casualty or Theft SummaryFigure 2-40. Casualty or Theft Summary ................................................................................................................................................................ 369369369369Figure 2-41. Gain/Loss WorksheetFigure 2-41. Gain/Loss WorksheetFigure 2-41. Gain/Loss WorksheetFigure 2-41. Gain/Loss Worksheet ................................................................................................................................................................................................................ 376376376376Figure 2-42. Schedule K-1 Gain/Loss WorksheetFigure 2-42. Schedule K-1 Gain/Loss WorksheetFigure 2-42. Schedule K-1 Gain/Loss WorksheetFigure 2-42. Schedule K-1 Gain/Loss Worksheet ............................................................................................................ 378378378378Figure 2-43a. Gain/Recapture Worksheet, Screen 1Figure 2-43a. Gain/Recapture Worksheet, Screen 1Figure 2-43a. Gain/Recapture Worksheet, Screen 1Figure 2-43a. Gain/Recapture Worksheet, Screen 1 ........................................................................................ 386386386386Figure 2-43b. Gain/Recapture Worksheet, Screen 2Figure 2-43b. Gain/Recapture Worksheet, Screen 2Figure 2-43b. Gain/Recapture Worksheet, Screen 2Figure 2-43b. Gain/Recapture Worksheet, Screen 2 .................................................................................... 388388388388Figure 2-44. Section 1256 ContractsFigure 2-44. Section 1256 ContractsFigure 2-44. Section 1256 ContractsFigure 2-44. Section 1256 Contracts .................................................................................................................................................................................................... 482482482482Figure 2-45. Losses from StraddlesFigure 2-45. Losses from StraddlesFigure 2-45. Losses from StraddlesFigure 2-45. Losses from Straddles ........................................................................................................................................................................................................ 484484484484Figure 2-46. Gains from StraddlesFigure 2-46. Gains from StraddlesFigure 2-46. Gains from StraddlesFigure 2-46. Gains from Straddles................................................................................................................................................................................................................ 485485485485Figure 2-47. Unrecognized GainsFigure 2-47. Unrecognized GainsFigure 2-47. Unrecognized GainsFigure 2-47. Unrecognized Gains .................................................................................................................................................................................................................... 486486486486Figure 2-48. Tax Shelter Registration WorksheetFigure 2-48. Tax Shelter Registration WorksheetFigure 2-48. Tax Shelter Registration WorksheetFigure 2-48. Tax Shelter Registration Worksheet ............................................................................................................ 488488488488Figure 2-49. Passive Activity WorksheetFigure 2-49. Passive Activity WorksheetFigure 2-49. Passive Activity WorksheetFigure 2-49. Passive Activity Worksheet ........................................................................................................................................................................ 507507507507Figure 2-50. Credit on Additions WorksheetFigure 2-50. Credit on Additions WorksheetFigure 2-50. Credit on Additions WorksheetFigure 2-50. Credit on Additions Worksheet ................................................................................................................................................ 533533533533Figure 2-51. Student WorksheetFigure 2-51. Student WorksheetFigure 2-51. Student WorksheetFigure 2-51. Student Worksheet ................................................................................................................................................................................................................................ 561561561561Figure 2-52a. Adoption Expense (Screen 1)Figure 2-52a. Adoption Expense (Screen 1)Figure 2-52a. Adoption Expense (Screen 1)Figure 2-52a. Adoption Expense (Screen 1) ................................................................................................................................................ 588588588588


Contents-6

Figure 2-52b. Adoption Expense (Screen 2)Figure 2-52b. Adoption Expense (Screen 2)Figure 2-52b. Adoption Expense (Screen 2)Figure 2-52b. Adoption Expense (Screen 2).................................................................................................................................................... 590590590590Figure 2-52c. Adoption Expense (Screen 3)Figure 2-52c. Adoption Expense (Screen 3)Figure 2-52c. Adoption Expense (Screen 3)Figure 2-52c. Adoption Expense (Screen 3) .................................................................................................................................................... 592592592592Figure 2-52d. Adoption Expense (Screen 4)Figure 2-52d. Adoption Expense (Screen 4)Figure 2-52d. Adoption Expense (Screen 4)Figure 2-52d. Adoption Expense (Screen 4).................................................................................................................................................... 593593593593Figure 2-53. Long-Term Care WorksheetFigure 2-53. Long-Term Care WorksheetFigure 2-53. Long-Term Care WorksheetFigure 2-53. Long-Term Care Worksheet .................................................................................................................................................................... 614614614614Figure 2-54. Address WorksheetFigure 2-54. Address WorksheetFigure 2-54. Address WorksheetFigure 2-54. Address Worksheet ............................................................................................................................................................................................................................ 625625625625Figure 2-55. Other Person WorksheetFigure 2-55. Other Person WorksheetFigure 2-55. Other Person WorksheetFigure 2-55. Other Person Worksheet............................................................................................................................................................................................ 625625625625Figure 2-56. Hope Credit WorksheetFigure 2-56. Hope Credit WorksheetFigure 2-56. Hope Credit WorksheetFigure 2-56. Hope Credit Worksheet ................................................................................................................................................................................................ 627627627627Figure 2-57. Lifetime Learning Credit WorksheetFigure 2-57. Lifetime Learning Credit WorksheetFigure 2-57. Lifetime Learning Credit WorksheetFigure 2-57. Lifetime Learning Credit Worksheet ............................................................................................................ 628628628628Figure 2-58. Alternative Vehicle Information WorksheetFigure 2-58. Alternative Vehicle Information WorksheetFigure 2-58. Alternative Vehicle Information WorksheetFigure 2-58. Alternative Vehicle Information Worksheet ............................................................ 645645645645Figure 2-59. Qualifying Student WorksheetFigure 2-59. Qualifying Student WorksheetFigure 2-59. Qualifying Student WorksheetFigure 2-59. Qualifying Student Worksheet ................................................................................................................................................ 649649649649Figure 4-1. Printout Menu with Figure 4-1. Printout Menu with Figure 4-1. Printout Menu with Figure 4-1. Printout Menu with e-filee-filee-filee-file .................................................................................................................................................................................................................... 4444

List of TablesTable 1-1. IRS Forms in 1040 EditionTable 1-1. IRS Forms in 1040 EditionTable 1-1. IRS Forms in 1040 EditionTable 1-1. IRS Forms in 1040 Edition ................................................................................................................................................................................................................ 5555Table 1-2. Supporting Data Entry Worksheets in 1040 EditionTable 1-2. Supporting Data Entry Worksheets in 1040 EditionTable 1-2. Supporting Data Entry Worksheets in 1040 EditionTable 1-2. Supporting Data Entry Worksheets in 1040 Edition ........................................ 7777Table 1-3. IRS Worksheets Built into CalculationsTable 1-3. IRS Worksheets Built into CalculationsTable 1-3. IRS Worksheets Built into CalculationsTable 1-3. IRS Worksheets Built into Calculations ........................................................................................................................ 8888Table 1-4. Standard Deduction SchedulesTable 1-4. Standard Deduction SchedulesTable 1-4. Standard Deduction SchedulesTable 1-4. Standard Deduction Schedules ............................................................................................................................................................ 10101010Table 1-5. Thresholds for Phaseout of ExemptionsTable 1-5. Thresholds for Phaseout of ExemptionsTable 1-5. Thresholds for Phaseout of ExemptionsTable 1-5. Thresholds for Phaseout of Exemptions ........................................................................................................ 10101010Table 1-6. Tax Rate SchedulesTable 1-6. Tax Rate SchedulesTable 1-6. Tax Rate SchedulesTable 1-6. Tax Rate Schedules............................................................................................................................................................................................................................................ 11111111Table 1-7. Recommended IRS PublicationsTable 1-7. Recommended IRS PublicationsTable 1-7. Recommended IRS PublicationsTable 1-7. Recommended IRS Publications................................................................................................................................................................ 6666Table 2-1. Where to Report Income (by type of income)Table 2-1. Where to Report Income (by type of income)Table 2-1. Where to Report Income (by type of income)Table 2-1. Where to Report Income (by type of income) ............................................................................ 3333Table 2-2. Where to Report Income (by IRS form received)Table 2-2. Where to Report Income (by IRS form received)Table 2-2. Where to Report Income (by IRS form received)Table 2-2. Where to Report Income (by IRS form received)........................................................ 4444Table 2-3. Where to Report DeductionsTable 2-3. Where to Report DeductionsTable 2-3. Where to Report DeductionsTable 2-3. Where to Report Deductions ........................................................................................................................................................................................ 5555Table 2-4. Abbreviations for Address EntryTable 2-4. Abbreviations for Address EntryTable 2-4. Abbreviations for Address EntryTable 2-4. Abbreviations for Address Entry ........................................................................................................................................................ 21212121Table 2-5. Official State CodesTable 2-5. Official State CodesTable 2-5. Official State CodesTable 2-5. Official State Codes ........................................................................................................................................................................................................................................ 22222222Table 2-6. Deductible Medical and Dental ExpensesTable 2-6. Deductible Medical and Dental ExpensesTable 2-6. Deductible Medical and Dental ExpensesTable 2-6. Deductible Medical and Dental Expenses........................................................................................ 87878787Table 2-7. Deductible Interest ExpensesTable 2-7. Deductible Interest ExpensesTable 2-7. Deductible Interest ExpensesTable 2-7. Deductible Interest Expenses............................................................................................................................................................................ 95959595Table 2-8. Deductible ContributionsTable 2-8. Deductible ContributionsTable 2-8. Deductible ContributionsTable 2-8. Deductible Contributions ........................................................................................................................................................................................................ 99999999Table 2-9. Miscellaneous DeductionsTable 2-9. Miscellaneous DeductionsTable 2-9. Miscellaneous DeductionsTable 2-9. Miscellaneous Deductions........................................................................................................................................................................................ 103103103103Table 2-10. Codes for Principal Agricultural ActivityTable 2-10. Codes for Principal Agricultural ActivityTable 2-10. Codes for Principal Agricultural ActivityTable 2-10. Codes for Principal Agricultural Activity .................................................................................... 177177177177Table 2-11. Limitations on CarsTable 2-11. Limitations on CarsTable 2-11. Limitations on CarsTable 2-11. Limitations on Cars................................................................................................................................................................................................................................ 244244244244Table 2-12. Type of Use for Nontaxable Uses of FuelTable 2-12. Type of Use for Nontaxable Uses of FuelTable 2-12. Type of Use for Nontaxable Uses of FuelTable 2-12. Type of Use for Nontaxable Uses of Fuel ................................................................................ 310310310310Table 2-13. Straight-Line Recovery PeriodsTable 2-13. Straight-Line Recovery PeriodsTable 2-13. Straight-Line Recovery PeriodsTable 2-13. Straight-Line Recovery Periods ................................................................................................................................................ 346346346346Table 2-14. Limitations on Passenger VehiclesTable 2-14. Limitations on Passenger VehiclesTable 2-14. Limitations on Passenger VehiclesTable 2-14. Limitations on Passenger Vehicles ........................................................................................................................ 358358358358Table 2-15. Recovery Periods for Office in HomeTable 2-15. Recovery Periods for Office in HomeTable 2-15. Recovery Periods for Office in HomeTable 2-15. Recovery Periods for Office in Home................................................................................................................ 582582582582Table 2-16. Forms Allowed for Electronic FilingTable 2-16. Forms Allowed for Electronic FilingTable 2-16. Forms Allowed for Electronic FilingTable 2-16. Forms Allowed for Electronic Filing .................................................................................................................... 668668668668Table 2-17. Overflow supporting statements allowedTable 2-17. Overflow supporting statements allowedTable 2-17. Overflow supporting statements allowedTable 2-17. Overflow supporting statements allowed ............................................................................ 669669669669Table 3-1. Laser Printer CompatibilityTable 3-1. Laser Printer CompatibilityTable 3-1. Laser Printer CompatibilityTable 3-1. Laser Printer Compatibility .................................................................................................................................................................................................... 2222

Introduction

Tax Forms Guide vs. User's GuidePaperwork Reduction Act Notice

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Introduction

intro-1

Tax Forms Guide vs. User's GuideTax Forms Guide for Timely Information. Because the tax forms and their in-structions are changed annually by the IRS, this Tax Forms Guide is revisedannually, based on the information we receive annually from the IRS:

Chapter 1. Highlights of Changes. A review of the important tax lawchanges for the year and how they affect the software.

Chapter 2. Form by Form Details. A detailed reference for every taxform in the software. This is the bulk of the guide, and containsdetails on nearly every line of each form and schedule that it covers.

Chapter 3. Laser and Windows Graphic Printing. Instructions for thegraphic printing of forms using our Standard Level or Premium Levelsoftware.

Chapter 4. Electronic Filing (e-file). Instructions for generating files forelectronic filing and submitting them for transmission to the IRSusing Standard Level or Premium Level versions of Tax Preparer.

When you get an update each year, you should leave the User's Guide in theHowardSoft binder, and

Replace the ENTIRE Tax Forms Guidewith this new version.

However, we strongly recommend that you also

SAVE the expired Tax Forms Guidesin a separate binder

for later help in producing records for an audit or preparing an amended re-turn. Two to three years worth of Tax Forms Guides will fit in eachHowardSoft binder, which you can purchase separately from us near ourcost.

User's Guide for Other Information. Unlike the tax forms, the structure andoperation of the software are stable, and change little from year to year. As aresult, the separate User's Guide is revised only as needed, and any changesinvolve very few pages of the guide. You will use this guide for years tocome for help with general operating procedures. First-time users can benefitfrom the tutorial on how to prepare and print a return. But the rest of theguide is an important reference for everyone. It includes keyboard charts,trouble-shooting hints, and complete details on translating prior-year returnsinto current-year returns, printing a return for filing, program setup, and cus-tom settings.

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Paperwork Reduction Act NoticeLegal requirement. The IRS requires that computer-generated forms containthe phrase "For Paperwork Reduction Act Notice, see instructions" and thatwe provide you with a copy of the notice. The following quote does not re-duce paper, but it does meet the IRS requirements:The Privacy Act of 1974 and Paperwork Reduction Act of 1980 say that when weask you for information, we must first tell you our legal right to ask for the infor-mation, why we are asking for it, and how it will be used. We must also tell youwhat 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 alsoapplies to any questions we need to ask you so we can complete, correct, or proc-ess your return; figure your tax; and collect tax, interest, or penalties.

Our legal right to ask for information is Internal Revenue Code 6001, 6011, and6012(a) and their regulations. They say that you must file a return or statementwith us for any tax you are liable for. Your response is mandatory under these sec-tions. Code section 6109 and its regulations say that you must show your socialsecurity number on what you file. This is so we know who you are, and can proc-ess your return and papers. You must fill in all parts of the tax form that apply toyou. But you do not have to check boxes for the Presidential Election CampaignFund.

You are not required to provide the information requested on a form that is subjectto the Paperwork Reduction Act unless the form displays a valid OMB controlnumber. Books or records relating to a form or its instructions must be retained aslong as their contents may become material in the administration of any InternalRevenue law. Generally, tax returns and return information are confidential, as re-quired by Code section 6103.

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.

We may give the information to the Department of Justice and to other Federalagencies, as provided by law. We may also give it to states, the District of Colum-bia, and U. S. commonwealths or possessions to carry out their tax laws. And wemay give it to foreign governments because of tax treaties they have with theUnited States.

If you do not file a return, do not provide the information we ask for, or providefraudulent information, you may be charged penalties and be subject to criminalprosecution. We may also have to disallow the exemptions, exclusions, credits,deductions, or adjustments shown on the tax return. This could make the taxhigher or delay any refund. Interest may also be charged.

Please keep this notice with your records. It may help you if we ask you for otherinformation. If you have questions about the rules for filing and giving information,please call or visit any Internal Revenue Service office.

Chapter 1

Highlights of Changes

OverviewIRS Forms Built into Software

Printouts and Form 1040 Tab SettingsForm by Form Changes

Recommended IRS Publications

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1-1

OverviewThree major tax bills enacted in 2007. Although only the AMT patch receivedsignificant coverage by the press, three bills had a major impact on forms fortax year 2007, and two of them passed in mid-December, long after the IRShad printed the most widely-used forms. It looked for a while like the IRSwould delay the start of the tax season, but in the end the IRS merely an-nounced impending changes early in the tax season and delayed the proc-essing of returns affected by the changes.

Small Business and Work Opportunity Act of 2007:

Passed in May, 2007, this bill was overshadowed in the press by the Iraqfunding bill to which it was attached (the U.S. Troop Readiness, VeteransCare, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007,H.R. 2206). The tax bill includes breaks for small businesses and simplifiedtax reporting for family businesses, but also expands the reach of the kiddietax to older children.

The good news...

Tax simplification for businesses of married couples. In the past, marriedtaxpayers who jointly own and co-operate a non-corporate business havebeen required to file a partnership return, complete with Form 1065 and twoSchedules K-1, and to report their income as partnership income on theirForm 1040 return. However, this requirement has always been counter-intuitive and has therefore caused a great deal of work for the IRS in trying toenforce this unnecessary bureaucratic requirement. The new bill simplifies thetax reporting by allowing a couple to report the business on two Schedules Cinstead, as if each spouses share of the business were a separate sole-proprietorship. The couple still must identify the amount of income and ex-pense attributable to each spouse, but the requirement to file a separate Form1065 return is eliminated. This change allows the use of Schedule C for re-porting income (starting tax year 2007) instead of requiring a partnership re-turn to be filed and the Schedule K-1 from the partnership reported onSchedule E.

Increased limits on first-year depreciation (section 179). The $112,000 al-lowance for section 179 expensing that would have applied for tax year2007 is raised to $125,000. Furthermore, the total cost of all property com-bined can now be $500,000 before it starts to phase out, up from the for-merly scheduled $400,000. These unusually high amounts were originallyslated to expire after tax year 2010, reverting to a $25,000 allowance with aphase-out starting at $200,000, but are now extended for one more year. ForGulf Opportunity Zone property (property in specified areas of the hurricanesof August 2006), these levels were originally increased for property placed inservice by the end of 2007, but this provision is now extended to the end of2008. The section 179 expense for GO Zone property can therefore be as

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high as $137,000 for tax year 2007, with the phase-out starting at$1,100,000 total cost. This change affects Forms 2106 and 4562 for 2007.

Work Opportunity Credit extension. The Work Opportunity Credit (which nowincludes the Welfare-to-Work Credit because of prior legislation) provides atax credit for employers who hire workers in targeted groups, but was slatedto expire after 2007. Under the new tax bill, it is extended to employees whobegin work before September 1, 2011. Furthermore, the targeted group forveterans is expanded to include certain veterans with service-connected dis-abilities. This change affects Form 5884 for 2007 because Form 8861 hasbeen integrated with Form 5884 for employees who start work in 2007 orlater. (Form 8861 still exists for 2007, but is now used only for emplyeeswho started work before 2007.)

Credit for employers who pay FICA tax on cash tips. An employer gets creditfor the amount of FICA paid on tips that, when combined with an employeeswages, exceed the Federal minimum wage. As a result, the credit is normallyreduced when the minimum wage is raised. The new bill freezes the wageused in the computation of the credit to the minimum wage in effect onJanuary 1, 2007 ($5.15 per hour). Therefore, the scheduled increase inminimum wage to $7.25 over a 2-year period will not reduce the credit as itwould have otherwise. This change affects Form 8846 for 2007.

AMT relief. Starting tax year 2007, the Work Opportunity Credit and thecredit for employer-paid FICA tax on cash tips (both expanded by the tax bill,as described previously) are exempted from limits of the alternative minimumtax. In other words, both credits may now offset the alternative minimumtax. This change affects Form 6251 for 2007.

and the bad

Kiddie Tax hit again. Under the kiddie tax law, a childs unearned incomeexceeding $1,700 (for 2007) is taxed at the parents tax rate to prevent par-ents from benefiting from putting their assets in the names of their children.However, the definition of child changed last year to hit children under age18, rather than just those under age 14. Under the new bill, the tax is ex-tended to children under age 19 (under age 24 if a student). However, thisextension does not apply to children whose earned income is no more thanhalf of their support. (The new provisions do not apply until tax year 2008 formost taxpayers because they apply only to tax years starting after the datethe bill was enacted. This means that parents have until the end of 2007 toarrange the sale of capital assets held in a childs name in order to have thesale taxed at the childs low 5% capital gains tax rate.) This change affectsForms 8615 and 8814 for 2008.

Other provisions

Provisions of less general interest in the new bill include additional extensionsand increased benefits for GO Zone activities, a number of benefits for S cor-porations, a number of revenue-raising provisions including changes in IRS


1-3

procedures and increased penalties, and several technical changes in pensionrules.

Tax Increase Prevention Act of 2007:

AMT patch. After months of controversy and threats from th

Tax Forms Guide - HowardSoft · Tax Preparer® Tax Forms Guide 2008 Edition (for preparing 2007...

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