4.10.10. Standard Paragraphs and Explanation of Adjustments

Custom Explanation

Earned Income

Indirect method

Nontaxable Income

Other Income

Reimbursements and Allowances

Rental Income

Unearned Income

Discharged Student Loans

Excess Foreign Living Expense. - IRC 912

Hardship Area Camp Exclusion - IRC 911

Income Earned/Puerto Rico

Income Earned/U.S. Possessions

Scholarships and Fellowships

Alimony

Bad Debts

Capital Gains and Losses

Casualty and Theft Losses

Self Employment Health Insurance

Compensation-Wages-Salaries

Contributions

Cost of Goods Sold

Depreciation

Educational Expense

Entertainment

Exemption

Gifts

Insurance

Interest Expense

Losses

Medical and Dental

Moving Expense

Office in the Home

Passive Activities

Rental Expense

Repairs

Taxes

Tools

Travel and Transportation

Work Clothes

Miscellaneous Expenses

Individual Retirement Arrangements/Keogh

Farm

Legal Expenses

Natural Resources

Net Operating Loss

Adoption Credit

Miscellaneous Credit

General Business Credit

Child Care Credit

Reserved

Elderly Credit

Reserved

Excess FICA Taxes Credit

Foreign Tax Credit

Low Income Housing Credit

Investment Tax Credit

Child Tax Credit

IRC 6020(b)

Education Credit

Earned Income Credit

Gasoline and Special Fuels

Electrical Vehicle Credit

Health Coverage Tax Credit

Alternative Minimum Tax

Penalties

Self-Employment and FICA Tax

Standard-Itemized Deductions

Tax Computations

Filer Bridge Program (TS Campus Only)

Affordable Care Act (ACA)

Reserved

Aliens

Community Property Laws

Computational Errors

Corporations

Filing Status

General

No Response

Partnerships

Home Distributorships

Appeals Division

1101

Commissions, fees, tips

Compensation received for services, including fees, commissions, tips, gratuities and similar items, is includible in income.

1102

Business or profession - computation

Taxable income received from your business or profession has been adjusted as shown in the enclosed computation.

1103

Gross receipts

Business gross receipts in the amount shown are includible in income.

1104

FICA tax paid by employer

The FICA (social security and Medicare) taxes paid on your behalf and not withheld from your wages are additional income to you.

1105

Gross receipts not included

Business gross receipts were not included in the amount shown.

1106

Form W-2

We have adjusted your gross wages to agree with the amounts shown on Form(s) W-2.

1107

Supplemental compensation/ bonuses

Supplemental compensation and bonuses are includible in gross income.

1108

Constructive receipt

Income is constructively received when it is credited to your account, or unconditionally set apart for you, or otherwise made available so that you could draw upon it at any time. Based on an analysis of your records and accounts, income is adjusted to reflect the income constructively received.

1109

Non-employee compensation

We have adjusted your income to include amounts shown in box 7 on Form 1099-MISC.

1110

Trade or business

Income from your trade or business should be reported on Schedule C and is subject to self-employment tax. You reported this income on your return as wages or other income. We have adjusted your return accordingly and included the income from your trade or business on the proper schedule.

1111

Deferred compensation

Nonqualified deferred compensation is includible in income when actually or constructively received (provided that such compensation was not required to be included in income in an earlier year under IRC 409A).

1112

Taxable income

It is determined that the following taxable income items were not reported on the filed tax return. An adjustment is made to report these items as income on your tax return. Accordingly, your taxable income is increased in the amounts and for the tax years shown.

1113

Sale of real estate

Income derived by an individual from the sale of real estate originally purchased as unimproved land and subsequently improved and developed primarily for sale to customers in the ordinary course of trade or business constitutes income from a trade or business. This income should be included in computing net earnings from self employment.

1114

Unsubstantiated SE income - Schedule C gross receipts

Since the record keeping requirements under IRC 6001 have not been met, and you have not complied with our request for substantiation of your Schedule C gross receipts, we are disallowing the self-employment income claimed on your return. The earned income credit and self-employment taxes have been adjusted accordingly.

1115

Additional documentation - Schedule C income and expenses; fillable

We have received the information you sent us on ________________. We are unable to change our determination since we need additional documentation to verify your Schedule C income and expenses. Please provide the necessary items needed to substantiate your business income and/or losses. Acceptable verification would be:
Cancelled checks (or other documents that identify payee, amount, and proof of payment/electronic funds transferred), record keeping books, computer printouts, ledgers, log books, receipts, bill (paid), etc.

The enclosed report reflects the proposed disallowance of the self-employment income claimed and a reduction of the self-employment taxes paid. We have also proposed to disallow the following deductions and/or credits:
_______ Filing Status (changed to either single or married filing separately)
_______ Exemption(s)
_______ Earned Income Credit
_______ Child Care Credit
_______ Schedule C Expenses

If you have any questions, you may call the number on the enclosed letter.

1116

Schedule C partial disallowance

We have adjusted your Schedule C gross receipts based on the substantiation you provided for our review. Unsubstantiated income has been removed and in turn will affect your earned income credit as well as your self-employment tax.

1117

Schedule C gross income and SE tax removed

Because we determined that the activity described on your Schedule C does not meet the guidelines of carrying on a trade or business within the meaning of IRC 162, we moved your gross income to line 21 of the Form 1040 (other income) and adjusted your self-employment tax to zero.

1118

Wages moved from Schedule C to Line 7

Only statutory employee wages may be reported on Schedule C and offset by expenses. Since your employer did not indicate on Form W-2 that you are a statutory employee, we disallowed your Schedule C income and expenses and have adjusted your return to include these wages on Line 7 of Form 1040. If you claimed the standard deduction, you may benefit from itemizing your deductions and reporting your employee business expenses on Line 21 of Schedule A.

1119

Wages moved - expenses allowed on Schedule A

Only statutory employee wages may be reported on Schedule C and offset by expenses. Since your employer did not indicate on Form W-2 that you are a statutory employee, we disallowed your Schedule C income and expenses and have adjusted your return to include these wages on Line 7 of Form 1040 and these expenses on Line 21 of Schedule A as employee business expenses, which are subject to the 2 percent adjusted gross income limitation.

1120

Statutory employee-separate Schedule C

The income earned as a statutory employee should not be combined with other gross receipts on Schedule C. If you earned both gross receipts and income as a statutory employee in the same trade or business, you must file separate Schedules C, and the business expenses should be reported on the appropriate Schedule C.

1121

Tip income

The enclosed reports reflect changes to your tax liabilities based on tip income you received but did not report to your employer or on your income tax return.
- Form 4549, Income Tax Examination Changes, shows the additional income tax and any applicable penalties due to the addition of the tip income.
- Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, reflects your share of the FICA (social security and Medicare) tax due on the additional tip income, plus penalties.
- Form 4137, Social Security and Medicare Tax on Unreported Tip Income, provides details of the computation of the FICA taxes and the corresponding penalty.
- Lead Sheet (Unreported Tip Income) shows how we determined the amount of tip income you received.

If you agree with the adjustments shown on the enclosed reports, please sign the Form 4549 and Form 2504 and return them to us in the enclosed envelope.

If you have information about your tip income that is different from the information we received from your employer(s), please send it to us. We will review it and notify you as to our decision.

1122

Schedule C net income disregarded

We have determined that the activity described in your Schedule C (1) was not engaged in with sufficient regularity and continuity; or (2) was engaged in for the primary purpose of generating tax benefits through the use of the refundable earned income credit. Therefore, we have disregarded your Schedule C and the business net profit reflected thereon for all federal tax purposes.

1123

Schedule C activity/gross income and SE tax removed

Because we determined that the activity described on your Schedule C does not meet the guidelines of carrying on a trade or business within the meaning of IRC 162, we removed your gross income and adjusted your self-employment tax to zero.

1124

Non-employee compensation - tax year 2020 and forward

We have adjusted your income to include amounts shown in box 1 on Form 1099-NEC.

1201

Net Worth - computation

In the absence of adequate records, your taxable income for the taxable year(s) shown above has been computed on the basis of increase in net worth, with adjustments for nontaxable items of income and non-deductible expenditures, if any. Accordingly, your taxable income is increased in the amount(s) shown above.

1202

Bank Deposits - computation

In the absence of adequate records, your taxable income for the taxable year(s) shown above has been computed by reference to bank deposits and cash payments, plus personal and other nondeductible expenditures if any. Thus, it is determined you had additional gross business income for the taxable year(s). Accordingly, your taxable income is increased in the amount(s) shown above.

1203

Source & application - computation

In the absence of adequate records, your taxable income for the taxable year(s) shown above has been computed by reference to the source and application of funds method. Thus, it is determined you had additional gross business income for the taxable year(s). Accordingly your taxable income is increased in the amount(s) shown above.

1204

Reasonable estimates from known sources of income

We have computed your unreported taxable income using reasonable estimates based on known sources of income and deductible expenses.

1205

Additional income from source indicated (examiner must specify)

From records and information available, it has been determined that you received additional income in the amount shown from the sources indicated.

1301

General nontaxable income

This item is not subject to Federal income tax.

1302

Child support payments-nontaxable

Amounts you receive for child support are not taxable.

1303

Wages of others not taxable to you

You can only include on your tax return your wages and those of your spouse if you file a joint return. You cannot include the wages of any other individual on your tax return.

1304

Foster care payments

You received qualified foster care payments and you did not exceed the limitations on the number of individuals for whom such payments can be excluded from gross income.

1401

Fair market value of noncash income items

Income in any form other than cash is includible in income at its fair market value.

1402

Refunds – state income tax

A refund of any part of your state income tax that you deducted in prior years, and which reduced your federal income tax in those years, is includible in income in the year you received the refund.

1403

Bad debt recovery

The recovery of a bad debt that you deducted in prior years, and which reduced your federal income tax in those years, is includible in income in the year you recover the debt.

1404

Forgiven debts

The amount of your debt which was cancelled or forgiven is includible in income.

1405

Constructive dividends

The corporate funds or benefits you received are taxable as constructive dividends in the amounts shown in the accompanying computation.

1406

Miscellaneous income reported on Form 1099-MISC

We have adjusted your income to include the amount shown on Form 1099-MISC.

1407

Form W-2G

We have adjusted your income to include the amounts shown on Form W-2G.

1408

Guaranteed payments/collective bargaining agreements

Payments received from your employer during periods of unemployment under a collective bargaining agreement that guarantees you full pay during the year are taxable.

1409

Lockout/strike benefits

Strike and lockout benefits paid by the union from union dues, including both cash and fair market value of goods received, are includible in income.

1410

Supplemental unemployment benefits/company financed plans

Supplemental unemployment benefit payments received from a company-financed supplemental unemployment benefit fund are subject to income tax.

1411

Bartering

You must treat a credit for goods and services offered for exchange in a barter operation as income when you receive that credit.

1412

Goodwill - sale of business

The gain on the sale of your business is increased due to an adjustment to the valuation of the goodwill. See the attached computation.

1413

Repossession - non-recourse financed equipment

Repossession of non-recourse-financed equipment results in ordinary income where gain, equal to non-recourse liability over adjusted basis is less than depreciation taken.

1414

IRC 482 income allocated

In accordance with IRC 482 of the Internal Revenue Code, to clearly reflect the income of the entities we have allocated income and deductions between the two entities. Your income has been increased as shown in the attached computation.

1415

Original issue discount

Retirement of bonds issued with "original issue discount" generally results in ordinary income in the following situations:

1. retirement of a short-term OID instrument (but only to the extent of accrued OID);

2. retirement of an OID instrument issued by a natural person before June 9, 1997;

3. retirement of an OID instrument issued before July 2, 1982, by an issuer that is not (i) a corporation or (ii) a government or political subdivision thereof;

4. retirement of an OID instrument that was issued with the intention to call before maturity; or

5. retirement of OID instrument issued prior to May 28, 1969 (but only to the extent of accrued OID).

1416

Interest income - periodic interest on principal not due to death

Interest on principal left on deposit with an insurance company that can be withdrawn by you is taxable to you when credited to your account.

1417

State municipal securities

Any profit from the sale of state or municipal securities is includible in taxable income.

1418

Installment election interest in excess of $1000

Up to $1,000 of interest on installment payments of life insurance proceeds (paid due to a death occurring before October 23, 1986) may be excluded each year from the beneficiary spouse's income. The additional interest must be included in the beneficiary spouse's income.

1419

Foreclosure - mortgage exceeds basis

We included the amount you realized on foreclosure of a nonrecourse mortgage to the extent that the mortgage indebtedness exceeded the adjusted basis.

1420

Foreclosure - fair market value of property exceeds basis

We included the amount you realized on foreclosure of a recourse mortgage to the extent that the fair market value of the foreclosed property exceeded the adjusted basis.

1421

Like kind exchange

To qualify as a nontaxable exchange under IRC 1031, the transaction must be an exchange of qualified property solely for property of like kind rather than a sale of property. Because you did not meet the requirements of a nontaxable exchange, we adjusted your taxable income as shown.

1422

Nonqualifying prop. exchanged not used in trade/business

Since the property you exchanged was not held for use in a trade or business or for investment, the transaction does not meet the requirements of a like-kind exchange; the gain you realized is includible in income.

1423

Nonqualified prop. in nontaxable transactions yields boot

Because you received nonqualified property (Boot) in addition to qualified property, the gain you realized on the exchange is includible in income, to the extent of the fair market value of the Boot.

1424

Assumed liab. less than those relieved of boot

Since you were relieved of more liabilities than you assumed in the exchange, the excess is treated as Boot and includible in income.

1425

Assignment of income-does not avoid recognition

Assigning the property that generates income to another will not avoid the recognition of income by the taxpayer making the assignment since the income was earned before the transfer. The income will be taxed to the person who earns it.

1426

General nontaxable income adj'd/computation

Your income has been adjusted as shown in the accompanying computation.

1427

Unemployment compensation

The total amount of unemployment compensation received is fully taxable and must be included in gross income.

1428

Unemployment

The total amount of unemployment compensation received is fully taxable and must be included in gross income. For tax year 2009, you do not have to pay tax on unemployment compensation of up to $2,400 per recipient. Amounts over $2,400 are still taxable.

1429

Recovery of an amount previously deducted in prior year

Since you recovered an amount deducted in a prior year, we included it in your gross income.

1430

Taxable part of social security benefits included in income

We included in your income the taxable part of your social security benefits, as shown in the attached computation.

1431

Taxable part of tier I RR benefits included in income

We included in your income the taxable part of your tier I railroad retirement benefits, as shown in the attached computation.

1432

Adjusted taxable part of social security railroad ret. benefits

Since we changed your adjusted gross income, we adjusted the taxable part of your social security benefits and/or your tier I railroad retirement benefits, as shown in the attached computation.

1433

Fringe benefits

Fringe benefits provided to you in connection with the performance of your services are includible in your gross income as compensation for services, unless specifically excluded by law. We have adjusted your income to include the fair market value of these fringe benefits.

1434

Fringe benefits (excluded)

You have included certain fringe benefits on your return. These items are not subject to Federal income tax so we have removed them.

1435

Educational assistance payments

In general, a maximum of $5,250 of employer provided educational assistance payments may be excluded from an employee's gross income. The payments may be for tuition, books, supplies, fees, and equipment. Your income has been adjusted to include amounts received over the limitations.

1436

Educational assistance payments (limited on exclusion)

Excludable employer provided educational assistance payments may not cover tools or supplies (other than textbooks) you retain after completion of the course. We have disallowed the expense for the tools and/or supplies.

1437

Employer's educational assistance-meals, lodging, transportation

Excludable employer provided educational assistance payments may not cover the cost of meals, lodging, or transportation. We have disallowed these expenses.

1438

Employer provided housing

The fair market value of housing provided by your employer must be included in income. We have determined the local value of your housing to be as shown.

1439

Form 1099-R

The Form 1099-R filed with your return indicates that the distribution does not qualify as a lump sum distribution. Your special averaging method has been disallowed.

1440

Lump sum distribution - (ten-year averaging)

If an individual receives separate lump sum distributions from an employer's qualified profit sharing and pension plan within one year, the individual must elect lump sum treatment as to all distributions or none will be entitled to special averaging.

1441

Lump sum distribution - (take-over or reorganization)

Since no separation actually occurs when an employee remains in the same job following a take-over or a reorganization, the distribution does not qualify for special averaging.

1442

Lump sum distribution - (not treated as capital gain)

Since you elected not to treat any part of your lump sum distribution as capital gain, the entire amount of the distribution must be entered on Form 4972, Tax on Lump Sum Distributions. We have adjusted your tax as shown on the enclosed report.

1443

Lump sum distribution - (pension plan terminated)

Since your employer has terminated its pension plan and your lump sum distribution was not the result of a separation from employment, your lump sum distribution does not qualify for special averaging.

1444

Pension income (Form 4972 disallowed)

Pension income that you reported on Form 4972, Tax on Lump Sum Distributions, does not qualify for special treatment and must be included in income. Your special ten-year averaging method has been disallowed.

1445

Lump sum distribution - (capital gain treatment not elected)

Because you did not elect capital gain treatment on the capital gain portion of your lump sum distribution, all of your distribution is ordinary income. Your income has been adjusted.

1446

Lump sum distribution - (not participant in plan for five years)

Since you were not a participant in the pension plan for at least five full taxable years preceding the taxable year the distribution was received, your distribution does not qualify as a lump sum distribution. Your special averaging method has been disallowed.

1447

Lump sum distribution - (amount not rolled over to an IRA)

When you rollover part of a qualified lump sum distribution to an Individual Retirement Account (IRA), the part not rolled over must be included in your gross income as ordinary income in the year you receive it. The amount you keep does not qualify for either capital gain treatment or special averaging.

1448

Lump sum distribution - (not employee separation)

Since your lump sum distribution was not the result of separation from employment, your special ten-year averaging method has been disallowed.

1449

Interest on life insurance proceeds

Generally when life insurance proceeds payable by reason of death of the insured are received by you in installments, the part of the installment that is considered interest is includible in your income. However, up to $1,000 of interest on installment payments of life insurance proceeds (paid due to a death occurring before October 23, 1986) are excludible each year from the beneficiary spouse's income.

1450

Employee educational assistance

You may not exclude employee educational assistance for courses leading to advanced academic or professional degrees unless the education is employment-related education. Therefore, the amount of assistance you received has been added to your gross income.

1451

Child's unearned income Form 8814

You previously timely filed Form 8814, Parents Election to Report Child's Interest and Dividends, with your tax return. This is an irrevocable decision to report unearned income of your child on your return. Per the election we are now including your child's unreported unearned income on your return.

1452

Cancellation of your student loan

The cancellation of your student loan is includible in income.

1453

Original return - omission of income

We recently received your original return for the tax year shown above and are processing your return. However, due to questionable issues and/or omissions of income, we are proposing to adjust the tax return you filed as shown in this report.

1454

Adjusted taxable amount of distribution

Your income has been adjusted to reflect the correct amount of the taxable distribution as reported on Form 1099–R.

1456

Benefits taxable income adjusted

Your income has been adjusted to reflect the correct taxable portion of your Distribution, Payments, or Benefits.

1457

Covenant not to compete income

Consideration received for a covenant not to compete results in income.

1458

Unreported unemployment compensation (tax year 2020)

We have made an adjustment to your income to include all taxable unemployment compensation you received. Based on the American Rescue Plan Act of 2021, unemployment compensation of up to $10,200 for individuals (for married filing joint returns, this exclusion is up to $10,200 per spouse), is only excludable from taxable income when adjusted gross income (AGI) is less than $150,000 (for all filing statuses).

1501

Moving reimbursement in excess of moving expense includible

Any part of reimbursements and allowances received from your employer for moving expenses that exceeds actual expenses is includible in income.

1502

Reimbursements are income/expenses not deductible

These expenses are not deductible by you, so the reimbursements or allowances you received from your employer for them are includible in your income as compensation.

1503

Lodging not a condition of employment/taxable

Since you were not required to accept lodging on your employer's premises as a condition of your employment, the value of the lodging is includible in income.

1504

Meals and lodging cash allowances are income

Cash allowances received from your employer for meals or lodging are includible in income. You may exclude from gross income advances or reimbursement amounts paid by your employer under an accountable plan to the extent of substantiated business expenses.

1505

Not established on business premises and employee convenience/value of meals is taxable

Since you did not establish that the meals were furnished (a) on your employer's business premises, and (b) for your employer's convenience, the value of the meals is includible in income.

1506

Not established employee convenience/condition of emp/value of lodging taxable

Since you did not establish that the lodging was furnished (a) on your employer's business premises, (b) for your employer's convenience, and (c) as a condition of your employment, the value of the lodging is includible in income.

1507

Unclaimed reimbursements/no deduction for expense allowed

Since you did not claim from your employer a reimbursement to which you are entitled, you may not claim a deduction for the expenses to which that reimbursement applies.

1508

Foreign taxes paid by employer are includible in income

Foreign taxes paid by your employer on your behalf are includible in income.

1509

Family allowance payments from foreign government

Family allowance payments received from a foreign government are includible in income.

1510

Non-accountable plan-subject to 2 percent limitation

Your reimbursement for employee business expenses must be included in income and wages because your arrangement did not meet one of these conditions:
(1) you did not pay or incur deductible expenses while performing services as an employee for your employer,
(2) you did not substantiate the elements of your expenses to your employer, or
(3) you were not required to return any excess payments received. Your expenses under a Nonaccountable plan are deductible only as a miscellaneous itemized deduction, subject to the two (2) percent adjusted gross income limitation.

1511

Per diem allowance more than government rate

Reimbursement you received from your employer as a per diem allowance that is more than the applicable government rate must be included in income.

1601

Income as shown

Rental income in the amount shown is includible in income.

1602

Advance rents

Advance rent is includible in rental income in the year received, regardless of the period covered or the accounting method used.

1603

Cancellation payments

Payment received for cancellation of a lease is rental income in the year received.

1604

Adjusted as shown in computation

Rental income reported on your return has been refigured as shown in the enclosed computation.

1605

Security deposits/refundable

Since the security deposits were not refundable, they constitute rent paid in advance and are taxable income in the year of receipt.

1606

Forfeited security deposits

Forfeited security deposits not previously reported are includible in taxable income.

1607

Lessee improvements intended as rent

Because the improvements made by the lessee, which became the property of the lessor on termination of the lease were intended as rent, they are includible in income.

1608

Lessee improvements in lieu of rent

Improvements to property made by a lessee in lieu of rent are treated as rent in the year they are made.

1609

Lessee improvements - liquidation of rent

Where buildings constructed or improvements made by a lessee represent a full or partial liquidation of lease rentals, the value of the buildings or improvements is taxable as rent in the year the lease is terminated.

1610

Min. annual royalty

To qualify as advanced royalties paid according to minimum royalty provisions, royalties paid must be substantially uniform in amount and paid at least annually for life of lease or at least 20 years. Since your payments do not meet these requirements, they are not deductible.

1611

Advance royalty for coal are not deductible

Since an engineering analysis shows that your coal reserves are inadequate or cannot be mined profitably, your advance royalty payments for coal are neither a deductible expense nor amortizable.

1612

Transfer of interest

Payments for transfers of interest in oil, gas and mineral-producing properties which are keyed to production are includible as ordinary income.

1613

Personal use-limitation

Your expenses are limited to your rental income. The limitation is applicable because the property was used personally by you, your relatives, your friends or your business associates for more than the greater of: 14 days or ten (10) percent of the number of days the unit was rented at fair market value.

1701

Alimony includible

Alimony or separate maintenance payments you received are includible in income.

1702

Embezzled funds includible

Embezzled funds are includible in income.

1703

Gambling winnings

Your gross gambling winnings are includible in income.

1704

Prizes and awards

Prizes and awards are includible in income.

1705

Interest income

All interest income is includible in income unless specifically exempted by law.

1706

Unreported pension income

You did not report all the pension income reported to you on Forms 1099-R. Your income has been adjusted to include the amount(s) shown on Form 1099-R that were omitted from your original return.

1707

Annuity includible

The annuity you received is includible in income.

1708

Corporate funds / dividends

The corporate funds you received are taxable as dividend income.

1709

Form 1099-DIV

We have adjusted dividend income to reflect the amounts shown on Form 1099–DIV.

1710

Imputed interest income/below market interest rate

It has been determined that you had imputed interest income per IRC 7872 from a loan/loans with a below market interest rate (low or no interest rate charged). Therefore, interest income as shown in the attached computation has been added to your taxable income for the year.

1711

Dividend income - FMV of property received

We adjusted your dividend income to reflect the fair market value of the property received from a corporation.

1712

Constructive dividends

You received constructive dividends in the amounts shown in the accompanying computation.

1713

Liquidating distribution

We adjusted the liquidating distribution you received, as shown in the accompanying computation.

1714

Interest on exchange bonds/redeemed H bonds interest

This adjustment amount represents interest on current-income series H bonds that were received in exchange for qualified U.S. Savings Bonds (for example series E, F, and J bonds) or savings notes. Reporting for Federal income tax purposes of interest accrued on the exchanged bonds and notes is deferred until the H bonds are redeemed, disposed of, or reach final maturity. Interest received on the H bonds, however, is reportable as income for the year in which that interest is received.

1715

Interest income - Form 1099-INT

We adjusted your interest income to reflect the amounts shown on Form 1099-INT.

1716

Interest on arbitrage bonds

The interest on arbitrage bonds obligations which are defined in IRC 148, is includible in income.

1717

Municipal securities sale profit

Any profit from the sale of State or municipal securities is includible in income.

1718

Form 1099-G

We have adjusted your income to include amounts shown on Form 1099-G.

1719

Dividend income - earnings and profit distribution

Since the distribution you received is out of earnings and profits of the distributing corporation, it is includible in taxable income as a dividend.

1720

Dividend included as shown

Dividend income is includible in your income in the amount shown.

1721

Alimony or separate maintenance income other than cash

Alimony or separate maintenance may include payments to third parties made on your behalf by your former spouse if such payments were made pursuant to a divorce or separation instrument. The payments shown in the enclosed schedule are includible in income.

1722

Interest income reduced, bonds used for education

Subject to limitations based on your filing status and modified adjusted gross income (Modified AGI), you may exclude all of the accrued interest from Series EE United States Savings Bonds issued after 1989, if they are redeemed to finance the higher education for yourself, your spouse, or your dependents. Your interest income has been reduced accordingly.

1723

Interest income increased, bonds used for educ. but other req not met

Since you (1) exceeded the modified adjusted gross income (AGI) limitations, or (2) filed as married filing separately, the exclusion for the accrued interest income from Series EE United States Savings Bonds issued after 1989 is limited or eliminated even though they were redeemed to finance the higher education for yourself, your spouse, or your dependents. Your income has been increased to include this interest income.

1724

Minor child investment income/tax rate of parent used

You were under age fourteen (14) and had investment income of more than twice the amount in effect for the taxable year for the limitation on the standard deduction for certain dependents, so we have recomputed part of your tax at the income tax rate of the appropriate parent.

1725

Debt forgiveness

Debt forgiveness is includible in your taxable income.

1726

Gambling winnings omitted

You failed to report all the gambling winnings reported to you on Form W-2G. We have adjusted your income to include the amounts shown on Form W-2G that were omitted from your original return.

2101

Loan forgiven

To be excluded from income, a student loan forgiven on or after January 1, 1983, must have been made by the federal government, a state or local government, or by an educational institution pursuant to any of those governments and the loan must state that part or all of it would be forgiven if the individual worked for a certain period of time, in a certain profession, for one or more of a broad class of employers. A loan forgiven after August 5, 1997, also may be excluded from income if it was made by an educational institution or charity refinancing a loan, but only if it was made in connection with a program of an educational institution encouraging students to serve in occupations or areas with unmet needs, and the program was under the direction of a government body, or a charity or educational institution that did not make a loan. Since your loan does not meet these qualifications, the amount forgiven may not be excluded from income.

2102

Loan cancellation

The cancellation of your student loan is excludable from income in the amount shown.

2103

Student loan debt discharged due to the death or disability of the student

We adjusted your taxable income to remove the discharge of student loan debt due to the death or disability of the student.

2301

Expenses attributable to tax-exempt income

According to IRC 265(a)(1), expenses attributable to tax-exempt income are not deductible. The portion of your mortgage interest and/or real estate taxes allocable to your tax-exempt living quarters allowance has been disallowed in full.

2302

Foreign post differential

The income exclusion you claimed on your tax return relating to your "Foreign post differential" has been disallowed. IRC 912(1)(c) provides an exclusion from gross income for allowances with the specific exception of the post differentials.

2401

Unearned income not excludable

Unearned income, such as dividends, interest, pensions, and capital gains, is not excludable under IRC 911.

2402

Foreign income not excludable/not a resident of a foreign country

Since you did not establish that you were a bona fide resident of a foreign country or countries for the entire tax year, or were physically present in a foreign country or countries for at least 330 days during 12 months in a row, the income you earned in a foreign country or countries is not excludable.

2403

Income from U.S. Government or agencies as comp. not excludable

Income received from the U.S. government or any of its agencies or instrumentalities as compensation for services performed by you as an employee, regardless of where the services were performed, is not excludable under IRC 911.

2404

Resident aliens/exclude income outside U.S./physical presence test

Resident aliens may be able to exclude income earned in a foreign country or countries under the physical presence test.

2405

Business transacted in U.S. directly related to business abroad

Compensation for services performed while in the United States on business is not excludable income under IRC 911.

2406

Physical presence test not met

Since you were not physically present in a foreign country or countries for 330 full days during 12 months in a row, the income you earned in a foreign country or countries is not excludable under IRC 911.

2407

Personal service (30 percent) excludable

Since you were engaged in a trade or business abroad in which both personal services and capital were material income-producing factors, a reasonable allowance as compensation for your personal services, of not more than 30 percent of your share of the net profits from the trade or business, is considered to be earned income. Accordingly, it is eligible for exclusion from gross income under IRC 911.

2408

Physical presence test-determining

In determining a full day of physical presence in a foreign country, do not count days of travel involving points within the United States or any of its territories, or travel over international waters for more than 24 hours or more.

2409

Income received abroad during another tax year

For purpose of IRC 911(a)(1), limitation, income received in one tax year for services performed abroad during another tax year must be attributable to the tax year in which the services were performed. This income may be excluded in the year of receipt, provided:
(a) It is received no later than the year following the year in which the services were performed, and
(b) The amount, when added to the excluded income for the year for which it is earned, is not more than the maximum limitation for that year.

2410

Prorated to ratio of qualifying days to total days

Since your qualifying period for the exclusion of income did not include a full tax year, you must prorate the limitation on the maximum earned income exclusion according to the ratio that the number of qualifying days in the tax year bears to the total number of days in the tax year.

2411

Reimbursement subject to limitation

The allowances or reimbursements you received are considered items of earned income subject to the limitation that applies on excludable income for the year.

2412

Restricted country /limitation general definition

Since all or part of the earned income from a foreign country(ies) was earned in a restricted country, none of the foreign income earned within that country over the qualifying period will be eligible for the foreign income exclusion.

2413

Limitation/computation

Foreign income earned is excludable subject to the limitation of IRC 911. The excludable part of your income earned that is foreign earned income is shown in the attached computation.

2414

Bona fide residence for entire year/income excludable

Since you were a bona fide resident of a foreign country or countries for the entire tax year, your foreign earned income is excludable subject to the limitation of IRC 911.

2415

Physical presence, income excludable by Sec 911

Since you were physically present in a foreign country or countries for 330 full days during 12 months in a row, your foreign earned income is excludable under IRC 911.

2416

Income earned by U.S. citizens in territories not excludable

Income earned in U. S. territories is not excludable under IRC 911.

2417

Income from service org. and other nonappropriated bases overseas

Amounts you received from employment by armed organizations and other nonappropriated fund activities at U. S. military bases overseas operated under official instructions or regulations are not excludable under IRC 911.

2418

Limits on income/housing exclusion/deduction

There are limits on income earned in restricted areas. If travel to a foreign country is restricted in the case where there have been regulations issued that (a) have been adopted under the Trading with the Enemy Act or the International Emergency Economic Powers Act, and (b) include provisions generally prohibiting U.S. citizens and residents from engaging in transactions related to travel to, from, or within a foreign country.

2419

Citizen or res. alien & filed joint with NR alien spouse

Since you are a citizen or resident alien of the United States and filed a joint return with your nonresident alien spouse, you must include your spouse's worldwide income on your return.

2420

Physical presence test/bona fide residence

If you qualify under either the bona fide residence or the physical presence test and your tax home is in a foreign country, you may exclude earned income from a foreign country as allowed under IRC 911(b).

2421

Adjusted housing cost amount

We adjusted your housing cost amount as shown.

2422

Bona fide residence-physical presence

We have disallowed the exclusion for income earned abroad since you did not establish that you were:
(a) a bona fide resident of a foreign country or countries for an entire tax year, or;
(b) physically present in a foreign country or countries for at least 330 full days during a period of 12 consecutive months.

2423

Adjusted expenses refigured

Since we have adjusted expenses related to foreign earned income, we have refigured your allowable foreign earned income exclusion as shown.

2424

Business expenses-excluded income (1982 fwd)

The exclusion of foreign earned income must be reduced by the portion of business expenses allocable to the excluded income.

2425

Valid election not made

The IRC 911 exclusion you claimed has been disallowed in full. To qualify for the exclusion, you must make a valid election on a timely filed tax return, an amended return for the first taxable year for which your election is to be effective, or on a tax return filed within one year after the due date of the return. Since your tax return was not timely filed and was not filed within one year of the date it was due, you have not made a valid election and may not claim the IRC 911 exclusion. However, in certain circumstances, elections not made in compliance with the rules will be honored (see Treas. Reg. 1.911-7(a) for further instructions).

2426

Not eligible for Sec 911/flight personnel

You are not eligible for the IRC 911 exclusion. United States citizens who reside outside the United States and who are employed as flight personnel by various airline companies with flights originating and terminating in the United States have a regular place of employment (home base) in the United States, regardless of where they are residing. They do not have a tax home in a foreign country as required by IRC 911.

2427

Lodging provided by employer - FMV income

The fair market value of housing provided by your employer must be included in income.

2428

Australia / U.S. closing agreement

You are not entitled to claim the IRC 911 exclusion due to the closing agreement you signed. In it you agreed to be subject to U.S. taxation instead of Australian tax under article 9 of the agreement between the United States and Australia relating to the establishment of a joint defense space research facility.

2501

Entire calendar year residency test not met

Since you were not a bona fide resident of Puerto Rico for at least an entire calendar year, your income from sources within Puerto Rico is not excludable.

2502

Two-year residency test not met

Since you were not a bona fide resident of Puerto Rico for the 2 years immediately preceding your change of residence from Puerto Rico, your income from sources within Puerto Rico is not excludable.

2503

SE Tax, Puerto Rico net earnings

According to IRC 1402(a)(6), net earnings from self-employment from sources in Puerto Rico are subject to self-employment tax, even though the income from these sources is otherwise excluded from gross income for federal income tax purposes.

2601

IRC 931/ income excluded for "specified territory "

An individual taxpayer who is a U.S. citizen is entitled, under IRC 931, to exclude from gross income the following items derived from the "specified territory" of the United States, which is American Samoa:

1. income derived from sources within any specified territory,

2. income effectively connected with the conduct of a trade or business within any specified territory,

3. subject to the limitation that the taxpayer shall not be allowed any deduction or credit properly allocable or chargeable against amounts excluded under IRC 931.

2602

IRC 931/ IRC 151

U.S. citizens who have income excludable under IRC 931, as well as income effectively connected with the conduct of a trade or business in a specified territory, are not allowed any deductions or credits (except the deduction under IRC 151 relating to personal exemptions) for items that are properly allocable to the income that is excludable under IRC 931.

2701

Compensation past, present or future s

Since the payments you received represent compensation for past, present, or future services, they are not excludable from income.

2702

Limitations - paid by employer/not excludable

Educational benefits paid or provided by your employer in exchange for services are includible in income.

2703

Limitations - not established as scholarship/fellowship

Since you did not establish that the amount received was a scholarship or fellowship grant, it is not excludable from income.

2704

Adjusted as shown/computation

We adjusted your scholarship or fellowship exclusion as shown.

2705

Compensation for services-grantor's benefit

An amount received for study and training is not excludable as a fellowship or scholarship grant if it represents payment for services subject to the direction or supervision of the grantor, or for activities performed primarily for the grantor's benefit. Since the amount you received was for such services or activities, it is not excludable from income.

2706

Compensation for spouses, dependent children/graduate level

Tuition reductions furnished by educational institutions to spouses and dependent children of employees are not excludable from income when the education is at the graduate level. Therefore, the amount of the tuition reduction you received has been added to your gross income.

2707

Qualified tuition and related expenses/room/board/laundry

Only the amount of a scholarship received for qualified tuition and related expenses, such as fees, books, supplies, and required equipment, is excludable from income. Amounts received for incidental expenses such as room and board, travel, laundry, and similar expenses must be included in income.

2708

Travel/clerical help, research

The amount included in your scholarship or fellowship for travel, research, clerical help, and/or non-required equipment must be included in income. We have adjusted your income to include this amount.

2709

Future services required

Federal grants for tuition and related expenses received with a requirement for future service cannot be excluded from gross income under current law.

2710

Limitations-tuition

Tuition reductions furnished by educational institutions to their employees are not excludable from gross income when the education is at the graduate level. Therefore, the amount of the tuition reduction you received has been added to your gross income.

3001

Insurance premiums not alimony unless assigned rights

Premiums paid on your life insurance policy are not deductible as alimony unless the policy has been assigned to your former spouse, who is the irrevocable beneficiary.

3002

Amounts paid to former spouse not alimony

Since the amounts paid to your former spouse are not alimony, they are not deductible.

3003

No written agreement

Since you did not make the payments to your spouse as a result of a written divorce or separation agreement, they are not deductible as alimony.

3004

Child support-not alimony

Since these payments are for child support, they are not deductible as alimony.

3005

Arrears apply first to child support/adjusted

When a payment for both alimony and child support is less than the amount called for in the decree, the payments are first applied to child support and any remaining amount is deductible as alimony.

3006

Delinquent child support payments are not alimony

Delinquent payments for child support made under a divorce decree are considered reimbursements to your former spouse for child support furnished during periods when payments were in arrears. These reimbursements are not deductible.

3007

Excess payments not alimony

No alimony deduction is allowed for any amount paid in excess of the amount specified in the decree or agreement.

3008

Lump sum cash or property settlement not alimony

Lump-sum cash paid as a property settlement is not deductible as alimony.

3011

Payments made were not alimony

Since you did not establish that the amount shown was (a) alimony and (b) paid, it is not deductible.

3012

Additional deduction allowed

You are allowed an additional deduction for alimony.

3013

Excess alimony income reported

The alimony income you reported was in excess of the amount which should have been reported. We have adjusted your alimony income accordingly.

3014

Payment not made in taxable year

Since the alimony was not paid during the tax year, it is not deductible.

3015

Adjusted to amount shown in computation

We have adjusted your alimony deduction as shown.

3016

Adjusted to amount verified as paid

We have adjusted your alimony deduction to the amount verified as paid.

3018

Requirements for alimony after 12/31/84

For tax years beginning after December 31, 1984, alimony must meet the following requirements:
(1) The payment is in cash,
(2) The parties do not designate that the payment is not alimony,
(3) If the parties are separated under a decree of divorce or separate maintenance, the parties are not members of the same household when the payments are made,
(4) There is no liability to make any payment (in cash or property) after the death of the recipient spouse, and
(5) The payment is not treated as child support.

3019

Recaptured excess alimony payments

Your excess alimony payments previously deducted have been recaptured and added to your income. See the attached computation.

3020

Alimony income verification

From records and income information available it has been determined that you received alimony income in the amount shown. If you do not agree that the amount shown must be reported as taxable income by you, please send us verification of the actual amount you received along with a copy of your divorce decree or separate maintenance agreement, as well as any modifications to them. This verification could be a copy of court payment records or a copy of legal actions you have instituted to enforce collection of court ordered alimony payments which were in arrears.

3021

No verification of alimony deduction

We cannot allow the Alimony Deduction until verification of the deduction is provided. Acceptable documents are: a complete copy of Divorce Decree and/or any modifications of the decree, copies of cancelled checks (or other documents that identify payee, amount, and proof of payment/electronic funds transferred), money orders or pay statements showing wage garnishments and information to verify that you are current with child support (if applicable.) The Social Security number of the recipient is also required.

3022

Alimony income/deduction for agreements signed after 12/31/2018

We adjusted your alimony income or deduction. Alimony and separate maintenance payments are excluded from income and are not deductible for divorce or separate maintenance agreements executed after December 31, 2018.

3023

Alimony income/deduction for agreements revised after 12/31/2018

We adjusted your alimony income or deduction because your divorce or separate maintenance agreement was revised after December 31, 2018. The law provides that alimony and separate maintenance payments are excluded from income and are not deductible if the agreement was modified after December 31, 2018 and the modification expressly provides the amendments of the Tax Cuts and Jobs Act of 2017 apply, even if entered into before that date.

3101

Noncorporate lender-disallowed-not established business use

In the year of payment, the noncorporate guarantor, endorser, or indemnitor of a noncorporate obligation may deduct the loss sustained upon his/her payment of the obligation as a business bad debt, provided he/she can establish that (a) the agreement to guarantee such debt was entered into in the course of the guarantee's trade or business; and (b) the borrower's obligation to the person to whom the payment was made was worthless at the time of payment. Since your loss did not reflect these circumstances, we have disallowed it.

3102

Forgiven loans are not bad debts

Loans which you made and later forgave are not deductible as bad debts.

3103

Addition to reserve disallowed

Since the bad debt reserve is adequate, we have disallowed your addition to the reserve.

3104

Transfer of funds to business is contribution to capital not loan

The claimed business bad debt resulting from the transfer of funds is a capital loss because the transferred funds were contributions to capital rather than a loan.

3105

Specific charge-off method-only debts becoming worthless in tax year

Since you use the specific charge-off method for your bad debt deduction, only debts which become worthless during the taxable year are allowed.

3106

Not established a bad debt and your loss-not allowed

Since you did not establish that the amount shown was (a) for bad debt, and (b) your bad debt loss, we have disallowed it.

3107

Additional deduction allowed

You are allowed an additional deduction for bad debts.

3108

Adjusted as shown/computation

We have adjusted your bad debt deduction as shown.

3109

Worthlessness not established during taxable year

Since the debt did not become worthless during the tax year, no deduction is allowed.

3110

Cash method-not in income

Since you used the cash method (reporting income only when received), and had not included uncollectible interest, rents, fees, salaries and wages in income, you may not claim them as bad debts.

3111

Gift-not a debt

The deduction claimed is not allowable as a bad debt since it was in the nature of a gift.

3112

Collection effort not demonstrated

Since you have not shown that all reasonable steps were taken to collect the debt, no deduction is allowed.

3113

Debtor/Creditor relationship not established

Since you did not establish that the amount shown was a bad debt arising from a true debtor-creditor relationship based upon a valid and legally enforceable obligation, we have disallowed it.

3114

Nonbusiness short-term capital loss

Your nonbusiness bad debt can be deducted only as a short-term capital loss. Capital losses are deductible only to the extent of capital gains plus $3,000 (or $1,500 for married filing separate). We have adjusted your loss accordingly. You may carry any unused loss forward to future years.

3115

Partially worthless-not a bad debt

Because your nonbusiness bad debt was not wholly worthless in the current year, it cannot be deducted. No deduction is available for partial worthlessness of nonbusiness bad debts.

3116

Valid enforceable obligation or fixed sum

Because there was no valid enforceable obligation to pay a fixed or determinable sum of money, your bad debt deduction is not allowed.

3117

Corp capital contribution

No bad debt deduction is allowable on the guarantee of the corporate obligation (business or nonbusiness) if, at the time the obligation was entered into, the payment was a capital contribution.

3118

Loss limitation

Both principal and interest amounts of the debt on which you are the guarantor are subject to loss limitation on business or nonbusiness bad debts. The interest on the debt cannot be deducted as interest.

3119

Business bad debt

Your individual business bad debt deduction is limited to payments under guarantees arising out of your business.

3120

Guarantor

Your bad debt deduction is denied because you, as guarantor, failed to show that you had received reasonable consideration for the guarantee agreement.

3121

Income never included

A cash-basis taxpayer may only claim a bad debt deduction for accounts receivable and notes receivable related to goods and services that are unpaid and uncollectible if such items have been included in gross income on the return for which the deduction is claimed, or for a previous year. Since it has not been established that your claimed deduction was previously included in income, your taxable income is increased by the amount of that deduction.

3122

Addition to reserve for bad debts after 1986

All taxpayers, other than financial institutions, certain farm credit institutions and finance companies, must use the specific charge-off method for bad debt expenses. Your bad debt deduction has been adjusted to the amount of the debts that became uncollectible this year.

3201

Adjusted as shown/computation

We have adjusted your net gain (or loss) from the sale or exchange of assets, as shown in the accompanying computation.

3202

Form 1099-S

Income from Form 1099-S is includible in income as shown.

3203

Adjusted net capital gain/adjust AMT

Since we adjusted your net capital gain (or loss) the alternative minimum tax is recomputed as shown.

3204

Separate return

Since you and your spouse filed separate returns, your deduction for net capital losses is limited to the lower of (1) excess of your capital losses over your capital gains or (2) $1,500.

3205

Holding period 6 months or less

Since you held this property for one year or less, the gain (or loss) is a short-term capital gain (or loss).

3206

Additional loss allowed

You are allowed an additional deduction for the capital loss shown.

3207

Maximum rate on capital gain

After May 6, 1997 the maximum rate of tax on your net capital gain may be 10 percent, 20 percent, 25 percent, 28 percent or a combination of those rates. Thus, your taxes have been adjusted accordingly. After May 6, 2003, and beginning before January 1, 2009, the 20-percent rate is reduced to 15-percent, the 10-percent rate to 5-percent (0 percent for taxable years beginning after 2007).

3208

Holding period 12 months or more

If you sold or exchanged property that is a capital asset held for more than one year, the gain or loss is considered a long term capital gain (or loss).

3209

Inventory items

Because the property was held by you primarily for sale to customers in the ordinary course of your trade or business, it does not qualify as IRC 1231 property, and the gain you realized is includible as ordinary income.

3210

Proceeds not reinvested

Since the proceeds from involuntary conversion were not reinvested in replacement property similar or related in service or use, the gain you realized is includible in income.

3211

Proceeds exceed cost

Since the conversion proceeds exceed the cost of replacement property acquired during a prescribed replacement period, the gain you realized shall be recognized and is includible in income.

3212

Ordinary income

The excess of capital losses over capital gains is deductible from ordinary income. Since this deduction is limited to the lesser of (1) the excess or (2) $3,000, your deduction has been adjusted as shown.

3213

Excess over $3,000 carry forward

The portion of your excess capital losses over capital gains which exceeded $3,000 is carried over to the succeeding year(s) and is computed as shown.

3214

Sale of personal residence/reporting

You must report the sale of your personal residence, even though you purchased a qualifying replacement residence or incurred a loss.

3215

Adjusted basis/computation

We adjusted the basis of your new residence.

3216

Taxable gain on sale of residence

We have adjusted your return to include the taxable gain on the sale of your personal residence. The gain is taxable because your replacement cost is less than the one you sold.

3217

Gain on sale of residence/exclusion after May 6, 1997

After May 6, 1997, the gain on the sale of your main home can be excluded up to a maximum of $500,000 (filing joint), and $250,000 (filing single), if certain rules are met. Therefore, your gain is adjusted as shown.

3218

Gain on sale of residence

Because you or your spouse have not owned and used the principal residence for period aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange, the entire gain from the sale or exchange of the principal residence is taxable as computed.

3219

Involuntary conversion/related party

After June 8, 1997, you cannot postpone the gains on the involuntary conversion because you acquired replacement property or stock from a related party and your total realized gain for the tax year on the involuntarily converted properties on which there is a realized gain of more than $100,000. Therefore, the gain is includible in income.

3220

Involuntary conversions realized gain

You cannot offset the gain with any losses when determining whether the total gain is more than $100,000. Thus the realized gain is recomputed as shown.

3221

Sale of small business stock/rollover capital gain

After August 5, 1997 you can choose to rollover the capital gain from the sale of qualified small business stock held for more than 6 months.

3222

Qualified business stock/rollover capital gain

You did not meet the requirement to choose to rollover the capital gain from the sale of qualified business stock. Therefore, we have recomputed your capital gain as shown.

3223

Termination of right or obligation

After September 4, 1997, the cancellation, lapse, expiration or other termination of a right or obligation with respect to property that is a capital asset is treated as a sale. Thus, any gain or loss is treated as a capital gain or loss.

3224

Real estate investment trust

After August 5, 1997, a real estate investment trust can keep its long term capital gains and pay the tax on them in the same way as a mutual fund.

3301

Lesser of FMV decrease or adjusted basis

Your casualty loss is the lesser of (a) the decrease in the fair market value of the property as a result of the casualty, or (b) the adjusted basis of the property.

3302

Definition of casualty-since not a casualty loss disallowed

A casualty is the complete or partial destruction or loss of property resulting from fire, storm, shipwreck or other casualty that is (a) identifiable; (b) damaging to property; and (c) sudden, unexpected, or unusual in nature. Since your loss is not a casualty, it is not deductible.

3303

Deductible only in year occurred

Your casualty loss is deductible only in the taxable year in which the casualty occurred. Since your casualty loss did not occur in the taxable year you claimed the deduction, and did not occur in a Federally declared disaster area, we have disallowed it.

3304

Insect attach-shrubs

Since the trees, shrubs, etc., on your property were damaged or destroyed by disease instead of by a casualty, you cannot deduct their value as a casualty loss.

3305

Moth/termite damage

The cost of repairing termite or moth damage is not deductible as a casualty loss.

3306

Deterioration not a casualty

Normal progressive deterioration is not deductible as a casualty loss.

3307

Indirect related expenses not a part of casualty

Expenses indirectly connected with a casualty, such as the cost of care for personal injuries, fuel, moving, or rental of temporary quarters, are not deductible as casualty losses.

3308

Insurance proceeds reduce loss

Insurance proceeds or any other recovery received, or expected to be received, reduce your casualty or theft loss deduction.

3309

Casualty loss/disaster area

Since you have a casualty loss in a Federally declared disaster area, you can deduct the loss on your return for the year immediately preceding the year in which the disaster occurred.

3310

Owner of property not TP

Since you did not own the damaged, destroyed, or stolen property, you cannot deduct the casualty or theft loss.

3311

Theft loss deductible-discovered

A theft loss is deductible in the tax year in which the theft loss is discovered.

3312

Not established a casualty occurred and loss sustained

Since you did not establish that (a) a casualty or theft occurred, and (b) any loss was sustained, the claimed loss is not deductible.

3313

Additional deduction allowed

You are allowed an additional deduction for the casualty or theft loss shown.

3314

Itemized deduction only/did not itemize

Since a casualty or theft loss is normally deductible as an itemized deduction, and you claimed the standard deduction, we have disallowed the casualty loss. The standard deduction, however, may be increased by any disaster loss deduction, equal to any net disaster loss” representing your personal casualty losses attributable to a Federally declared disaster occurring before January 1, 2010, in a disaster area, net of your personal casualty gains, as provided under IRC 165(h)(3).

3315

Decrease in FMV or basis not established/adj'd to reasonable amt

Since you did not establish the amount of the decrease in the fair market value of the property as a result of the casualty, or your adjusted basis in the property, we have adjusted your deduction to an amount determined reasonable.

3316

Loss items not a theft

Since you did not furnish evidence that the item was stolen or otherwise lost as a result of a casualty, we have disallowed the theft loss deduction.

3317

FMV before loss greater than expected insurance proceeds

A casualty loss deduction is not allowable since you have not shown that the fair market value immediately before the loss was more than you received or expect to receive as insurance proceeds or other compensation.

3318

Claim for insurance not filed

Insurance proceeds or any other recovery received reduces your casualty or theft loss deduction. Since you chose not to file a claim for reimbursement with your insurance company, we have disallowed your loss to the extent that reimbursement could have been received.

3319

Loss on personal residence

The amount shown on your return as a casualty loss resulting from damage to your personal residence is not allowed because it has not been established that any deductible loss within the meaning of IRC 165 was sustained during the taxable year.

3320

Theft loss decreased FMV less than cost

The deduction shown on your return as a theft loss is decreased because the fair market value of the items stolen was less than their cost, and under IRC 165 a theft is limited to the lesser of cost or fair market value at the time of theft.

3321

Deduction decreased-loss limitation

The deduction shown on your return as a casualty loss is decreased because the fair market value of the items destroyed was less than their cost, and under IRC 165 a casualty loss is limited to the lesser of cost or decrease in fair market value.

3322

AGI changed

For each casualty and theft loss, you must reduce that loss by $100 (for taxable years beginning on or before December 31, 2008), $500 (for taxable years beginning after December 31, 2008, and before January 1, 2010), or $100 (for taxable years beginning after December 31, 2009) and by ten (10) percent of your adjusted gross income. Since your adjusted gross income was changed, we adjusted your casualty or theft loss accordingly.

3323

Buyer resistance loss

You cannot claim a casualty loss based on a decrease in value due to buyer resistance.

3324

Personal casualty and theft loss (tax years 2018 and later)

Since you did not establish that the personal casualty or theft loss was attributable to a federally declared disaster, we have disallowed your deduction. You may only claim a personal casualty or theft loss that is not attributable to a federally declared disaster to the extent the loss does not exceed personal casualty or theft gains.

3401

Adjusted to correct percentage

Your deduction for self-employed health insurance has been adjusted to reflect the correct percentage. For taxable years:
beginning in 1999 through 2001--------------- 60 percent
beginning in 2002------------------------ 70 percent
beginning in 2003 and thereafter----- 100 percent

3402

Limited to net income from self-employment adjusted

Your deduction for self-employed health insurance is limited to your net earnings from self-employment from the business for which your medical plan is established. Because we changed your self-employment income and/or expenses and those changes affected your net income from self-employment from the business, we have also adjusted your insurance deduction.

3501

Unreasonable or excessive

No deduction is allowed for any compensation that is unreasonable or excessive. See the accompanying computation.

3502

Unreasonable or excessive compensation

No deduction is allowed for any compensation that is unreasonable or excessive.

3503

Accrual-basis TP

Even though you are an accrual-basis taxpayer, you cannot deduct salaries, wages and other expenses owed to a related person until the tax year you make the payment and the amount is includible in the income of the person paid.

3504

Not established compensation/paid

Since you did not establish that the amount shown was (a) compensation, and (b) paid, the amount is not deductible.

3505

Additional deduction allowed

You are allowed an additional deduction for compensation expenses.

3506

Not paid in tax year

Since the compensation expenses were not paid during the taxable year, they are not deductible.

3507

Not incurred in tax year

Since the compensation expense was not incurred during the taxable year, we have disallowed your deduction.

3508

Salary capitalized

You cannot deduct salaries and other compensation incurred for constructing capital assets. They must be included in the basis of the constructed asset and recovered through depreciation deductions.

3601

Not a qualifying organization

Since the reported contribution was not made to a qualified organization, we disallowed it.

3602

Time contributed

You may not deduct the value of time or services donated to charitable causes.

3603

Foreign organization

Since these contributions were made directly to a foreign organization, they are not deductible.

3604

Bingo, raffle tickets or other games of chance

Amounts paid for raffle tickets, to play bingo, or to engage in other games of chance are not deductible as contributions.

3605

Specific individual benefits

Since this contribution was made for the benefit of a specified individual, it is not deductible.

3606

Dues

Membership dues paid to a fraternal or veterans organization are not deductible.

3607

Tuition costs

Since these costs are personal tuition expenses, they are not deductible.

3608

Property at FMV/computation

A deduction for a contribution of property to a qualifying organization is measured by the fair market value of that property at the time the gift is made. The attached computation shows the value determined for the donated property.

3609

Property/ordinary income/computation

Your contribution of property (which, if sold on the date contributed, would have resulted in ordinary income or short-term capital gain) is deductible to the extent shown in the attached computation.

3610

Inventory items donated

Since the donated property consisted of inventory items, the deduction is limited to your cost.

3611

Limitations/see computation

Your contributions that are more than the maximum limitations are not deductible. See the attached computation.

3612

Not established a contribution and paid

Since you did not establish that the amounts shown were (a) contributions, and (b) paid, the amounts are not deductible.

3613

Additional deduction allowed

You are allowed an additional deduction for charitable contributions.

3614

Item deductions only-did not itemize-no deduction

Since contributions are deductible only as itemized deductions, and you did not itemize, we disallowed the deduction.

3615

Not made during year

Since the contributions were not made during the tax year, they are not deductible.

3616

Adjusted as shown in computation

We adjusted your contribution deduction as shown in the attached computation.

3617

Auto expenses computed at standard rate

We figured your allowable deduction for charitable contributions related to the use of an automobile in connection with rendering gratuitous services, at the applicable standard rate per mile.

3618

Travel expenses

Per IRC 170(j), no charitable deduction is allowed for travel expenses, including transportation, meals and lodging, unless there is no significant element of personal pleasure, recreation, or vacation in the travel.

3619

Auto exp. allowed to extent of out of pocket expense

The car expenses reported are allowed only to the extent that they represent out-of-pocket expenditures for such items as gas, oil, and parking fees. Depreciation, insurance, and the pro rata portion of general repairs and maintenance expenses cannot be deducted.

3620

Substantiation lacking/reasonable amount allowed

You are required to substantiate each reported contribution. Since you did not substantiate all contributions reported, we adjusted your deduction to the amount verified or determined reasonable based on all available information.

3621

Property at FMV reasonable amount allowed

The contribution of property to a qualifying organization is measured by the fair market value of that property at the time the gift is made. Based on available information, we adjusted your reported deduction to an amount determined reasonable.

3622

Percentage limitations

We have adjusted your charitable contributions to con with the percentage limitations.

3623

Requirements of IRC 170 not met

The amount shown on your return as a deduction for charitable contributions is not allowable in full because it has not been established that the total amount was paid during the tax year or that the unallowable items met the requirements of IRC 170.

3624

Not paid during year

It has not been established that the amount shown on your return as a charitable contribution was paid during the tax year. Therefore, this deduction is not allowable.

3625

Limitation on clothing and personal goods

A deduction for charitable contributions in the of clothing and personal and household goods is limited to the fair market value of these items at the time of donation. Since these items, particularly clothing, have very little resale value, your deduction has been reduced to reflect a reasonable amount.

3626

Cash contribution over $250

Since you have not provided a written acknowledgement or payroll records for each qualified organization to which you gave a contribution of $250 or more in cash, as required by IRC 170, we have disallowed the deduction.

3627

Contribution of property

To be allowed a deduction for property as a contribution, you must show (a) the name and address of the qualifying organization(s), (b) provide a list of what was donated, and (c) show the fair market value of each item on the date of contribution. Since you have not met these requirements, we have adjusted the amount as shown.

3628

Fair market value exceeded

If you pay more than the fair market value to a qualifying organization for merchandise, goods, or services, the amount you pay that is more than the value of the item may be a charitable contribution.

3629

Appraisal fee

An appraisal fee that you pay to find the fair market value of donated property is not deductible as a charitable contribution. However, it may be claimed as a miscellaneous deduction subject to the 2 percent limitation.

3630

Political parties

Contributions to political parties and candidates do not qualify as charitable contributions.

3631

College or university limited to 80 percent

Eighty percent of a payment to a college or university for the right to purchase tickets to athletic events is deductible as a charitable contribution. No deduction is allowed for the amount that is for the actual cost of any tickets purchased.

3632

Carryover contributions -
DDB Rule 101 and 102

We have disallowed the amount you claimed on Schedule A as a carryover contribution from a prior year. You may only carry over amounts that you were not able to deduct on your tax return for the five succeeding tax years. Our records indicate that you did not meet this requirement; therefore we have recomputed your tax liability.
If you believe our records are incorrect and you have any information you would like us to consider regarding the amount you entered as a carryover contribution on Schedule A, please submit it.
If the amount of the carryover contribution on Schedule A originated from another tax return, please provide a copy of that return. If the return is too large to photocopy and mail to us, you must at least provide copies of pages 1 and 2 of Form 1040 and Schedule A.
If the amount of the carryover contribution on Schedule A was entered in error and actually belongs on another line of Schedule A, you must provide the correct line number, a description of the deduction and verification that the amount claimed was paid.
Examples of acceptable verification are cancelled checks (or other documents that identify payee, amount, and proof of payment/electronic funds transferred), statements and receipts showing the date the expense or deduction was paid, the amount and the payee's name. You may send photocopies of the information you wish us to consider. If you send copies of cancelled checks, you must send copies of the front and back of each check.

3633

AGI changed - contributions changed

Contributions are limited if they exceed a certain percentage of your adjusted gross income (AGI). Since your AGI was changed, we adjusted your deductible contributions accordingly.

3634

College or university athletic event seating (taxable years after 12/31/2017)

We disallowed your charitable deduction for your payment in exchange for athletic seating. No charitable contribution is allowed for a payment to an institution of higher education in exchange for the right to purchase tickets or seating at an athletic event.

3701

Beginning inventory changed

We adjusted your income because of the change to your beginning inventory.

3702

Ending inventory changed

We adjusted your income because of the change to your ending inventory.

3703

Purchases understated

Since your purchases were understated, your income has been decreased.

3704

Purchases overstated

Since your purchases were overstated, your income has been increased.

3705

Merchandise/personal use

We reduced your purchases by the amount shown. This figure represents the merchandise which was withdrawn for personal use.

3706

Not established purchases and made during tax year

Since you did not establish that the amount shown was for purchases, and made during the tax year, the amount is not includible in the cost of goods sold.

3707

Additional deduction allowed

You are allowed an additional deduction for purchases.

3708

Purchases not made during tax year

Since the purchases were made before or after the tax year, the amount for purchases may not be included in the cost of goods sold.

3709

Full absorption method

The cost of goods produced or manufactured by you must be determined by using the full absorption method of inventory costing which includes direct and indirect production costs. We have recomputed your inventory and cost of goods sold accordingly.

3710

Overhead expenses allocated

Both work in process and finished goods inventories must include allocable overhead expenses. We have adjusted your inventory to reflect these expenses.

3711

Beg/End inventory not valued on same basis

Since your beginning and ending inventories were not valued on the same basis we have adjusted the cost of goods sold and income.

3712

Unallowable valuation method

Since you used an unallowable method to value your inventory we have changed your inventory valuation method and adjusted the cost of goods sold and income accordingly.

3713

Inventory valuation method

Except for those taxpayers who use the LIFO method, all items included in inventory should be valued at either cost or the lower of cost or market value. Those taxpayers using the LIFO method must value their inventory at cost. We have adjusted your inventory accordingly.

3714

Cost of goods sold-unreported income

In the absence of proof of specific amounts, we have computed your unreported income and have approximated the cost of goods sold as shown.

3715

Reasonable COGS amount determined

Because you did not furnish sufficient information, we adjusted cost of goods sold to an amount determined to be reasonable for your business according to the gross receipts you reported.

3716

Merchandise or equipment sold

Businesses involving the sales of merchandise or equipment cannot expense the cost of merchandise or equipment until it is sold. The deduction you took for all purchases made during the year has been disallowed and an inventory has been established.

3717

Cost must be capitalized per IRC 263A

These costs must be capitalized in accordance with IRC 263A.

3718

Costs must be included in inventory costs per IRC 263A

These costs must be included in inventory costs in accordance with IRC 263A.

3719

COGS disallowed/lack of substantiation

Cost of goods sold has been disallowed due to lack of substantiation.

3720

COGS subject to uniform capitalization rules per IRC 263A

The cost of goods produced or manufactured by you are subject to the uniform capitalization rules under the provisions of IRC 263A. We have recomputed your inventory and cost of goods sold accordingly.

3801

Maximum IRC 179 expense (for tax years prior to 2010)

Your deduction for IRC 179 expense is limited to the maximum amount. For taxable years beginning in 2001 or 2002, the maximum amount is $24,000. For taxable years after 2002 and before 2008, the maximum amount starts at $100,000 and is indexed annually for inflation as follows: taxable year 2003 - $100,000; taxable year 2004 - $102,000; taxable year 2005 - $105,000; taxable year 2006 - $108,000; and taxable year 2007 - $125,000. For taxable years 2008 and 2009 the maximum amount is $250,000.

3802

Maximum IRC 179 expense (for tax years after 2009)

Your deduction for IRC 179 expense is limited to the maximum amount. For taxable years beginning 2010 through 2016, the maximum amount is $500,000. The $500,000 amount is indexed annually for inflation for taxable years beginning after December 31, 2016. For taxable year 2017 the maximum amount is $510,000.

3803

IRC 179 election not timely

Your deduction for IRC 179 expense has been disallowed, because you did not timely make the election. For any taxable year beginning after 2002, a taxpayer is permitted to make an election under IRC 179 without the consent of the Commissioner on an amended Federal return for that taxable year. This amended return must be filed within the time prescribed by law for filing an amended return for that taxable year.

3804

Personal use items

You cannot claim depreciation on your home, automobile, or other such items used for personal purposes.

3805

Land

Land cannot be depreciated.

3806

Portion of year property not owned

You cannot claim depreciation for that part of the taxable year you did not own or use the property.

3807

Property not owned

You cannot claim depreciation on property you do not own.

3808

Depreciation out

Since this property has been or should have been fully depreciated in prior years, no depreciation is allowed.

3809

Election to amortize capital expenditures not timely

Taxpayers may elect to amortize certain capital expenditures, under the authority of IRC 169, IRC 171 and IRC 174, as provided by the applicable statute. Since you failed to make your election for amortization of these capital expenditures in a timely manner, we have disallowed your deduction for amortization, as shown in the attached computation.

Under the authority of IRC 195, IRC 248 and IRC 709, taxpayers may elect to amortize certain capital expenditures paid or incurred on or before October 22, 2004, over a 60 month period. Since you failed to make your election for amortization of these capital expenditures in a timely manner, we have disallowed your deduction for amortization, as shown in the attached computation.

Under the authority of IRC 248 and IRC 709, taxpayers may elect to deduct certain capital expenditures paid or incurred after October 22, 2004, not in excess of $5,000, and amortize the remaining balance of these capital expenditures over a 180 month period. Under the authority of IRC 195, taxpayers may elect to deduct certain capital expenditures paid or incurred after October 22, 2004, in taxable years beginning before January 1, 2010, not in excess of $5,000, and amortize the remaining balance of these capital expenditures over a 180 month period. For capital expenditures paid or incurred in a taxable year beginning in 2010, the maximum amount under IRC 195 is increased to $10,000. Since you failed to make your election for deduction and amortization of these capital expenditures in a timely manner, we have disallowed your deduction and amortization, as shown in the attached computation.

3810

Capital expenditures amortized/other than required months or deducted other than required amount

Taxpayers may elect to amortize certain capital expenditures, under the authority of IRC 169 and IRC 174, as provided by the applicable statute. Since you utilized a time period other than 60 months, we have recomputed your amortization deduction, as shown in the attached computation.

Under the authority of IRC 195, IRC 248 and IRC 709, taxpayers may elect to amortize certain capital expenditures over a 60 month period. Since you utilized a time period other than 60 months, we have recomputed your amortization deduction, as shown in the attached computation.

Under the authority of IRC 248 and IRC 709, taxpayers may elect to deduct certain capital expenditures paid or incurred after October 22, 2004, not in excess of $5,000, and amortize the remaining balance of these capital expenditures over a 180 month period. Since you utilized a time period other than 180 months or utilized an amount exceeding $5,000, we have recomputed your deduction and amortization, as shown in the attached computation.

Under the authority of IRC 195, taxpayers may elect to deduct certain capital expenditures incurred after October 22, 2004, in taxable years beginning before January 1, 2010, not in excess of $5,000, and amortize the remaining balance of these capital expenditures over a 180 month period. For capital expenditures incurred in a taxable year beginning in 2010, the maximum amount under IRC 195 is increased to $10,000. Since you utilized a time period other than 180 months or utilized an amount exceeding $5,000 (or $10,000 for capital expenditures incurred in a taxable year beginning in 2010), we have recomputed your deduction and amortization, as shown in the attached computation.

Under the authority of IRC 195, taxpayers may elect to deduct certain capital expenditures paid or incurred after October 22, 2004, in taxable years beginning before January 1, 2010, not in excess of $5,000, and amortize the remaining balance of these capital expenditures over a 180 month period. For capital expenditures paid or incurred in a taxable year beginning in 2010, the maximum amount under IRC 195 is increased to $10,000. Since you utilized a time period other than 180 months or utilized an amount exceeding $5,000 (or $10,000 for capital expenditures incurred in a taxable year beginning in 2010), we have recomputed your deduction and amortization, as shown in the attached computation.

3811

Goodwill

Goodwill acquired before August 11, 1993 cannot be depreciated.

3812

Property not used in a trade or business

Since the property is not used in a trade or business, or for the production of income, no depreciation is allowed.

3813

Capital improvements

You cannot claim depreciation on equipment or other business assets to the extent the equipment or assets are used to construct your own capital improvements.

3814

Items held for sale

You cannot claim depreciation on items held for sale to customers.

3815

Property converted to rental use

The depreciable basis for property converted from personal use to rental use is the lower of its cost or fair market value on the date of conversion.

3816

Cost/basis not established

Since you did not establish (a) the cost or other basis of the assets, and (b) that it is depreciable, no depreciation is allowed.

3817

Additional deduction allowed

You are allowed an additional deduction for depreciation.

3818

Major repairs/improvements

The cost of major repairs or improvements to property that increase its value or prolong its life is a capital expenditure. It must be added to the cost or other basis of the property and depreciated over the applicable recovery period.

3819

Capital expenditure

The cost of an asset having an expected life of more than one year is a capital expenditure that must be depreciated over the applicable recovery period. Although the claimed expense has been disallowed, depreciation has been allowed as shown.

3820

Depreciation not taken in prior years

The depreciation you failed to deduct in prior years is not deductible in the current or any later tax year.

3821

Component method

For buildings placed in service before 1981, you may not depreciate a used building using the component method of depreciation unless the cost is properly allocated to the various building components based on their value and useful lives. Since you have not verified the cost breakdown satisfactorily, we have recomputed your depreciation deduction.

For a building placed in service after 1980, you may not depreciate the building using the component method of depreciation. Since you have utilized the component method, we have recomputed your depreciation deduction.

3822

Covenant not to compete

For contracts entered into before August 11, 1993, the portions of the cost of a business attributable to goodwill and going concern were nondepreciable. Because the cost of goodwill and covenant not to compete are grouped and not separable, it is not possible to ascertain the portion of the cost allocable to the covenant not to compete. No depreciation is allowable.

3823

IRC 1250 property

Since you sold IRC 1250 property on which you claimed accelerated depreciation, part of the gain as shown on the attached computation is ordinary income.

3824

IRC 1245 property

Gain on the disposition of depreciable personal property used in a trade or business (IRC 1245 property) is taxable as ordinary income to the extent of the depreciation deductions allowed or allowable.

3825

Amortization expense change to allowable method

We have changed your amortization expense to an allowable method. See attached computation.

3826

No ACRS before 1981/after 1986

Property placed in service before 1981 and after 1986 does not qualify for accelerated cost recovery system (ACRS) depreciation.

3827

IRC 179 election/disallowed as a current expense

Since you did not make a special election under IRC 179, we have disallowed the deduction as a current expense.

3828

IRC 179 expense/property does not qualify

We have disallowed the deduction you claimed for a IRC 179 expense because the property does not qualify as IRC 179 property.

3829

Property no longer used in business

Since the property on which you elected the IRC 179 deduction ceased to be used predominately in a trade or business at any time before the end of the property's recovery period, the difference between the IRC 179 deduction and what would have been allowable under modified ACRS is includible in income in the taxable year in which the property is not used predominantly in a trade or business.

3830

Modified ACRS before 1987

The Modified ACRS Depreciation does not apply to property placed in service before 1987 unless you have elected these rules for property placed in service after July 31, 1986 and before 1987. Your property does not qualify for the Modified ACRS Depreciation.

3831

Modified ACRS for automobile

Because you used Modified ACRS for your business automobile, the depreciation and tax credit limits of IRC 280F apply. Your deduction is further limited to your business use percentage therefore, we have adjusted your depreciation as shown in the attached computation.

3832

Auto use 50 percent or less

Since you did not use the listed property more than 50 percent for business or work, your deduction under IRC 179 and/or a portion of your depreciation are disallowed.

3833

Auto use less than 50 percent

Since you did not use the listed property more than 50 percent for business or work, your deduction under IRC 179 and/or your depreciation are disallowed.

3834

IRC 197 intangibles

IRC 197 intangibles acquired after August 10, 1993 (or after July 25, 1991, if a valid retroactive election has been made under Treas. Reg. 1.197-1T) are ratably amortizable by the purchaser over a 15 year period. Most acquired intangibles, such as goodwill and covenant not to compete, are IRC 197 intangibles. Accordingly we have corrected your amortization deduction as shown in the attached computation.

3901

Maintain/improve skills

Since you have not established that the educational expenses were either required by your employer or the law or incurred to maintain or improve skills required in your employment, they are not deductible under Treas. Reg. 1.162-5.

3902

Minimum education requirements

Since these expenses were incurred to meet the minimum educational requirements for qualification in your employment, they are not deductible under Treas. Reg. 1.162-5.

3903

Qualify for new trade or business

Since the courses you took are part of a program of study that may lead to qualifying you for a new trade or business, the expenses are not deductible under Treas. Reg. 1.162-5.

3904

Re-entering trade/business

Since you were absent from work for more than a year, educational expenses incurred during your absence are not deductible under Treas. Reg. 1.162-5.

3905

Unemployed

Educational expenses incurred while you are not employed, or not actively engaged in a trade or business, are not deductible under Treas. Reg. 1.162-5.

3906

Dependent education expense

Educational expenses incurred for a dependent are not deductible under Treas. Reg. 1.162-5.

3907

Personal reasons

Since these educational expenses were incurred for personal reasons, they are not deductible.

3908

Travel/personal reasons

Since these travel expenses were incurred primarily for personal reasons, they are not deductible as educational expenses other than meals and lodging during the time spent participating in deductible educational pursuits under Treas. Reg. 1.162-5.

3909

Establish payment as ordinary and necessary

To be allowed a deduction for educational expense, you must furnish information to establish (a) payment was actually made during the taxable year, and (b) the expense was ordinary and necessary to your employment. Since your deduction does not reflect these circumstances, we have disallowed the amount shown.

3910

Additional deduction allowed

You are allowed an additional deduction for employee educational expenses.

3911

Must claim as itemized deduction

Since these educational expenses are deductible only as itemized deductions, and you did not itemize, no deduction is allowed under Treas. Reg. 1.162-5.

3912

Not paid during tax year

Since the educational expenses were not paid during the taxable year, they are not deductible.

3913

Computation

We have adjusted your educational expense deduction as shown in the accompanying computation.

3914

Auto expense

We figured your allowable deduction for car expense mileage for educational purposes at the standard rate.

3915

Work to school travel

Since your attendance in school is not temporary, your deductible transportation expense relating to education is computed using only the expense between your place of work and the school. If you go home before going to school, you may deduct the expense of going from home to school only to the extent it does not exceed the expense from work to school. Since the deduction you claimed was not computed correctly, we have adjusted your expense.

3916

Amount verified

We have adjusted your educational expense deduction to the amount verified as paid.

3917

Home to school - nonwork day

Since your attendance in school is not temporary you may not deduct the cost of transportation between your home and school on a nonworking day. We have adjusted your deduction to disallow this expense.

3918

Travel as education

Educational expenses in the form of travel are not deductible when the travel itself serves as the education. We have disallowed this deduction.

3919

Adjusted gross income changed

Only the educational expenses exceeding 2 percent of your adjusted gross income are deductible. Since other adjustments made in this report effect your adjusted gross income, we have also adjusted your educational expense.

3920

Expenses exceeding AGI limitation

You may only deduct educational expenses that exceed 2 percent of your adjusted gross income. Since you did not verify expenses exceeding this limitation, your deduction has been disallowed.

3921

Tuition and fees

Since you did not establish the amount shown was
(a) Tuition and fees, and
(b) Paid,
the amount shown is disallowed. Educational institutions that receive payments for qualified tuition and fees are required to file Form 1098-T, Tuition Statement, with the IRS and furnish a copy to the student.

3922

Student loan interest

Since you did not establish the amount shown was
(a) Student loan interest, and
(b) Paid,
the amount shown is disallowed. Financial, governmental, and educational institutions that receive qualified student loan interest payments during a calendar year are required to file Form 1098-E, Student Loan Interest Statement, with the IRS, and furnish a copy to the borrower.

4001

Deduction for dues disallowed

For tax years beginning January 1, 1994, you are not allowed a deduction for dues (including initiation fees) for membership in any club organized for business, pleasure, recreation, or other social purposes.

4002

Not required by employer

Since expenses you incurred were not required by your employer, they are not deductible.

4003

Business benefit not established

Since you did not establish that a business benefit could reasonably be expected as the result of incurring these entertainment expenses, they are not deductible.

4004

Records and receipts not adequate

Since you did not maintain adequate records and receipts to document your deduction, we have adjusted your expense(s), as shown in the attached computation.

4006

Payment not established as ordinary or necessary (verbose)

To be allowed a deduction for entertainment expenses, you must furnish information to establish that
(a) payment was actually made during the taxable year, and
(b) the expense was ordinary and necessary to your business or profession.
Since you did not establish the above for all of your deductions, we have disallowed the amount shown.

4007

Adequate records description/not established/disallowed

To be allowed a deduction for entertainment expenses, you must maintain adequate records to establish the
(a) amount of each expenditure,
(b) date the entertainment took place,
(c) location of the entertainment,
(d) business purpose for the entertainment, and
(e) business relationship to you of the person entertained.
Since you did not establish the above for all of your deductions, we have disallowed the amount shown.

4008

Additional deduction allowed

You are allowed an additional deduction for business entertainment expenses.

4009

Not established as ordinary and necessary/disallowed

Since you did not establish that these entertainment expenses were ordinary and necessary to your business or profession, they are not deductible.

4010

Not paid during year

Since the entertainment expenses were not paid during the taxable year, they are not deductible.

4011

Adjusted/see computation

We have adjusted your entertainment deduction as shown in the accompanying computation.

4012

Not incurred during year/disallowed

Since the entertainment expense was not incurred during the taxable year, we have disallowed the deduction.

4013

Not outside salesman/must itemize

An outside salesperson is a full-time employee who does his/her selling principally away from the employer's place of business. Since you do not qualify as an outside salesperson, the expenses claimed are not deductible in determining your adjusted gross income.

4014

Expense of spouse or client's spouse/not ordinary and necessary

You may not deduct the cost of entertainment allocable to your spouse or to the spouse of a business customer unless you can show that you had a clear business purpose rather than a personal or social purpose in incurring such expenses.

4015

Expense limit 50 percent deductible

The amount of otherwise allowable entertainment expenses must be reduced by 50 percent. We have adjusted your deduction to allow only the 50 percent which is deductible.

4016

Expense limit 50 percent deductible/tax year beginning after Dec. 1993

For tax years beginning after December 1993, the amount of the otherwise allowable entertainment expense must be reduced by 50 percent. We have adjusted your deduction to allow only the 50 percent which is deductible.

4017

Receipts or records inadequate/business expense over $75

After September 30, 1995, receipts are required for all business expenses over $75. Since you did not maintain adequate records or receipts to substantiate your deduction, we have adjusted your expense, as shown in the attached computation.

4018

Tickets limited to face value/non-luxury

Your deduction for tickets to entertainment events cannot exceed the face value of that ticket. It also cannot exceed the face value of non-luxury seating.

4019

Deduction for entertainment disallowed

After December 31, 2017, no deduction is allowed for:

1. An activity generally considered to be entertainment, amusement, or recreation,

2. A facility used in connection with the above items (this includes dues or fees to any social, athletic, or sporting club or organization), and

3. Membership dues with respect to any club organized for business, pleasure, recreation, or other social purposes.

4101

Services received in exchange for support/disallow exemption

Since this person provided you with housekeeping services and/or child care services in exchange for support, the exemption is being disallowed.

4102

Form 8332 not attached to return/disallow exemption

The dependency exemption(s) claimed for your child (or children) who did not live with you because of divorce or separation, has (have) been disallowed since Form(s) 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or a similar statement was (were) not attached to your return.

4103

Former spouse-cannot claim

Since you were divorced or legally separated at the end of the tax year, you cannot claim an exemption for your former or estranged spouse.

4104

Spouse had income and taxpayer filed separate return

Since your spouse had gross income, you cannot claim an exemption for your spouse on your separate return.

4105

Spouse dependent of another taxpayer and taxpayer filed separate return

Since your spouse was another taxpayer's dependent, you cannot claim an exemption for your spouse on your separate return.

4106

Deceased spouse/claim only year of death

You cannot claim an exemption for your deceased spouse after the year of death.

4107

Former spouse had custody/disallowed

Since your former spouse had custody of the child for a greater portion of the tax year than you did and you did not attach Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or similar statement to your return, we disallowed the dependency exemption.

4108

Support test not met/computation

Since you did not provide over 50 percent of this person's total support, we disallowed the dependency exemption. See the attached computation.

4109

Support test not met/disallowed

Since you did not provide more than 50 percent of this person's total support, we disallowed the dependency exemption.

4110

Gross income equal to exemption amount

Since this person had gross income equal to or greater than the exemption amount, we disallowed the dependency exemption.

4111

Joint return filed by claimed dependent

Since this person filed a joint return, we disallowed the dependency exemption.

4112

Member of household test not met

Since this person was not a member of your household for the entire tax year, we disallowed the dependency exemption.

4113

Relationship violates local law

Since the relationship between you and this person is in violation of local law, we disallowed the exemption.

4114

Citizen or resident test not met

Since the person is neither a U.S. citizen or national, nor a resident of the United States, Canada, or Mexico, we have disallowed the dependency exemption.

4115

Additional exemption allowed

You are allowed an additional exemption for the person(s) listed.

4116

Not established entitled to exemption/disallowed

Since you did not establish that you are entitled to the exemption(s) for the person(s) listed, the exemption(s) is/are being disallowed.

4117

Support test not met and no Form 2120 submitted

We have disallowed this exemption because you did not contribute more than one-half of the person's total support, nor did you establish that you were entitled to the exemption under a multiple support agreement.

4118

FRV of claimed dependent's lodging added to support

Since the person you claimed as a dependent lived in his/her own home, the fair rental value of his/her lodging must be added to other items of support to arrive at the cost of total support. We have disallowed the exemption because the support you provided is not more than one-half of total support.

4119

TP lived rent-free in dependents/FRV reduces support below 1/2

Since you lived rent-free in the home of the person you claimed as a dependent, the amount you spent for his/her support must be reduced by the fair rental value of your lodging. We have disallowed the exemption because the remaining amount, is not more than one-half of the total cost of support.

4120

Capital expenses-support/nonsupport

Capital expenditures, such as the purchase of a car, furniture, and household appliances purchased for personal and family reasons that benefit all members of the household are not considered items of support for tax purposes. Since your remaining contributions are not sufficient to constitute more than one-half of the person's total cost of support, the exemption claimed has been disallowed.

4121

Household expenses must be allocated support test not met

Your contribution to the upkeep of a household cannot be considered as entirely for any one person when all persons living in the household benefited from it. We must assume that all persons equally shared the amount you furnished because you did not establish otherwise. Because you have not established that you furnished more than one-half of the cost of the total support of the person you claimed as a dependent, we have disallowed the dependency exemption.

4122

Household expenses offset personal expenses

Contributions by a member of a household apply first to the payment of his/her own share of the expenses, and then any excess which cannot be traced to a certain member is considered to apply pro rata to the expenses of all who did not provide their own full support. Under this method of distribution, you did not establish that you furnished more than one-half of the cost of the total support for the person you claimed. We have, therefore, disallowed the exemption.

4123

Student-must meet support test to claim as dependent

Even though your child is a student, you must still meet the support test. Any amount spent from your child's own funds, including his/her wages, on such things as clothing, education, medical and dental care, recreation, transportation, entertainment, and similar items, must be added to the total cost of support in determining whether you furnished more than one-half of the support. Since you did not establish that you furnished more than one-half of the cost of total support for your child, we have disallowed the dependency exemption.

4124

Decree specifies can claim but did not provide $600

Although your pre-1985 decree of divorce or separate maintenance specifies you may claim the exemption for your child, we have disallowed it because you provided less than $600 for his/her support.

4125

Dependent of another TP after 1986

You may not claim a personal exemption for any year that you can be claimed as a dependent by another taxpayer.

4126

No personal exemption specified levels after 1987

The benefit of the personal exemption is phased out for individuals whose adjusted gross income is above specified levels. See the enclosed computation.

4127

Total cost of support not established-cannot determine 1/2

To determine whether you contributed more than one-half of the cost of the total support of the person you claimed as a dependents support, it is necessary to know the cost of total support. Since you have been unable to show the cost of total support, we disallowed the exemption.

4128

Tax-free income is support to the extent it is used for support - disallowed as support test not met

Payments such as social security benefits, pensions, and State welfare benefit payments received by a person claimed as a dependent are part of that person's support unless it is shown otherwise. These payments are support to the extent that the payments are used for support. Since these payments represent more than one-half of the claimed person's total support, we disallowed the exemption.

4129

Spouse exemption disallowed-no info on income or dependency

The exemption claimed for your spouse is disallowed, since you did not establish that your spouse had no gross income and was not the dependent of another taxpayer.

4130

U.S./Japan treaty rule/see computation

Under the provision of the United States/Japan Income Tax Treaty, the deduction has been disallowed because it is not permitted under the current treaty.

4131

Spouse filed separate return

Since your spouse filed a separate return, you may not claim an exemption for your spouse.

4132

Disallow exemption/claimed by another taxpayer

We are disallowing the exemption claimed since another taxpayer has also claimed this dependent on his/her tax return.

4133

Partial exemption disallowed

The partial exemption shown on your return has been disallowed because the Internal Revenue Code does not provide for partial exemptions.

4134

Identify exemptions disallowed

We disallowed your claim to an exemption for the following persons:

4135

Custody of dependent-prior to 1/1/2005

The parent having custody for the greater part of the calendar year is entitled to the dependency exemption unless he or she expressly waives the right to claim the exemption. This applies to cases of legal separation, divorce, separation by written agreement, and to cases where the parents live apart during the last 6 months of the calendar year. Since you did not have custody, and the custodial parent did not waive the right to claim the exemption, we disallowed the dependency exemption.

4136

Custody of dependent waived-prior to 1/1/2005

The parent having custody is entitled to the dependency exemption unless he or she waives the right to claim the exemption. Since you signed a waiver, we disallowed the exemption.

4137

Student over 23 after 1988

You may not claim a dependency exemption for a student who will reach age 24 in the calendar year, unless that student's gross income is less than the exemption amount.

4138

Exemptions limited if income more than dollar amount of FS

The amount you can claim for your exemptions is reduced if your adjusted gross income is more than the dollar limit for your filing status. Your adjusted income is more than that limit, so we reduced the amount you can claim. We have attached a Personal Exemption Worksheet to show you how we figured the change.

4139

Limitation on exemptions does not apply-AGI less than FS limit

The amount you can claim for your exemptions is reduced if your adjusted gross income is more than the dollar limit for your filing status. Since your adjusted gross income is less than the limit, this reduction does not apply to you, and you can claim more for your exemptions than you did. We increased the amount of your exemptions and attached a Personal Exemption Worksheet to show you how we figured this change.

4140

Not established entitled to exemption/disallowed

Since you did not establish that you are entitled to the exemption(s), it/they is/are being disallowed.

4141

Verification of parent entitled to exemption - prior to 1/1/2005

Please provide a complete copy of your divorce decree, decree of separate maintenance, written separation agreement or any other written agreement relating to custody or the dependency exemption, including any relevant modifications If you are the noncustodial parent, please provide a copy of the release of claim to exemption signed by the custodial parent.

4142

Exemptions/credits - DDB Rule 112 - prior to 1/1/2005

Our records show that we received two or more federal individual income tax returns, including yours, using the same social security number(s) claiming one or more of the following:
1. dependency exemption(s)
2. education credit
3. child care credit
4. dependent tax credit
The duplicated social security number(s) is:
_________________________________
We have disallowed the dependency exemption and any of the above credits that you may have taken on your return. If you do not agree with our determination and have documentation that you would like us to review, please submit those documents from the list below that you believe will support your claim for the dependent.
For Dependents who live with you:

1. A copy of the birth certificate and social security card for each person claimed.

2. School, medical, or other records to determine the place of residence of each person claimed as a dependent.

3. A record of income or other record of support received for each person claimed as a dependent, including wages, payments from social service agencies, Social Security, V.A. benefits, and child support.

4. A record of amounts contributed to household expenses by each person living in the household with the person claimed as a dependent.

5. If you were divorced or legally separated, a complete copy of your divorce decree, decree of separate maintenance, written separation agreement, or any other written agreement, relating to custody or the dependency exemption, including any relevant modifications.

blank

blank

Other Dependents:

1. A computation of the total cost of the support of the person claimed as well as cancelled checks (or other documents that identify payee, amount, and proof of payment/electronic funds transferred), and receipts to verify amounts you spent for the person's support, if claiming a dependent under a multiple support agreement, provide a signed statement (Form 2120, Multiple Support Agreement) from each person who provided over 10 percent of the support of the person you claimed, confirming that he or she did not claim an exemption for the person whom you claimed. Statements should include his/her name, address and social security number.

2. A written statement showing the amount provided by any person or agency (such as, Social Security, social service agencies, Veterans Administration) that provided funds for the claimed person's support.

3. If you were divorced or separated, a complete copy of your divorce decree, decree of separate maintenance, written separation agreement, or any other written agreement, relating to custody or the dependency exemption, including any relevant modifications.

4. A Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or similar written statement, signed by the custodial parent, agreeing not to claim an exemption for the child.

5. A copy of the birth certificate and social security card for all dependents.

4143

Noncustodial parent - taxable years beginning after 12/31/04

We have disallowed the dependency exemption for one or more of your children. Generally, a noncustodial parent is not allowed to claim an exemption for a child unless the custodial parent releases a claim to exemption on Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or a substantially similar statement, and the noncustodial parent attaches a copy of the release to his or her return. Since you did not provide a copy of the release, we disallowed the exemption.

4144

Custodial parent released exemption - taxable years beginning after 12/31/04

We have disallowed the dependency exemption for one or more of your children, because you signed a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or substantially similar statement releasing a claim to exemption.

4145

Tie-breaker rule for two or more taxpayers claiming a child as a qualifying child - tax years beginning after 12/31/04 and before 1/1/09

We have disallowed one or more of the following child-related benefits under the tie-breaker rule that applies when two or more taxpayers claim the same child as a qualifying child:

1. the dependency exemption,

2. head of household filing status,

3. the child and dependent care credit,

4. the child tax credit,

5. the earned income credit,

6. the exclusion for dependent care assistance.

4146

Student-must meet support test to claim as dependent before 1/1/2005

Even though your child is a student, you must still meet the support test. Any amount spent from your child's own funds, including his/her wages, on such things as clothing, education, medical and dental care, recreation, transportation, entertainment, and similar items, must be added to the total cost of support in determining whether you furnished more than one-half of the support. Since you did not establish that you furnished more than one-half of the cost of total support for your child, we have disallowed the dependency exemption.

4147

Student over 23 after 1988 and before 1/1/2005

You may not claim a dependency exemption for a student who will reach age 24 in the calendar year, unless that student's gross income is less than the exemption amount.

4148

Tie-breaker rule for two or more taxpayers who may claim a child as a qualifying child - tax years beginning after 12/31/08

We have disallowed one or more of the following child-related benefits under the tie-breaker rule that applies when two or more taxpayers may claim the same child as a qualifying child:

1. the dependency exemption,

2. head of household filing status,

3. the child and dependent care credit,

4. the child tax credit,

5. the earned income credit,

6. the exclusion for dependent care assistance.

4201

Gifts to superiors

Gifts made to your superiors are not deductible.

4202

Limited $25 to any one individual

Business gifts allowed as deductions may not exceed $25 to any one individual per year.

4203

Not established a gift and paid/disallowed

Since you did not establish with contemporaneous records, that the amount shown was (a) for business gifts, and (b) paid, it is not deductible.

4204

Additional deduction allowed

You are allowed an additional deduction for business gifts.

4205

Unreimbursed business gifts

Unreimbursed business gifts are deductible only as miscellaneous itemized deductions. Miscellaneous deductions are deductible to the extent that they exceed 2 percent of your adjusted gross income. Since changes made elsewhere in this report effect your adjusted gross income, we have adjusted your miscellaneous deduction.

4301

Personal residence insurance

House and household insurance premiums on your personal residence are not deductible.

4302

Auto insurance disallowed since TP used standard rate

Since you used the standard mileage rate to compute your automobile expense deduction, we have disallowed the automobile insurance expense deduction.

4303

Auto insurance reduced due to personal use

You cannot deduct automobile insurance expense for the amount attributable to personal use.

4304

Failed to establish qualifies and was paid

Since you did not establish that the amount shown was (a) insurance expense, and (b) paid, the amount is not deductible.

4305

Additional allowed

You are allowed an additional deduction for insurance expenses.

4306

Not paid during year

Since the insurance expenses were not paid during the taxable year, they are not deductible.

4307

Not incurred during taxable year

Since the insurance expense was not incurred during the taxable year, we have disallowed the deduction.

4401

Not legally liable/disallowed

The interest expense you claimed is not deductible since you are not legally liable for the debt.

4402

Avg. unpaid balance method/computation

If an interest charge on your installment contract cannot be established, the deduction is the lesser of (a) 6 percent of the average unpaid balance of your contract, or (b) the aggregate carrying charges which are properly attributable to such taxable year. We have, therefore, adjusted your interest expense deduction as shown.

4403

Points paid by borrower for services

Points you paid as a borrower as compensation for specific services that the lender performs in connection with your account are not deductible as interest.

4404

Points paid by seller

Points paid by a seller are not deductible if the points were not subtracted from the purchase price of the residence in computing its basis.

4405

Interest to purchase tax exempts

You cannot deduct interest paid on a loan used to purchase or hold tax-exempt securities.

4406

Int. paid on loan to purchase/single premium annuity/endowment/life

You cannot deduct interest paid on a loan used to purchase or hold a (a) single premium annuity contract purchased after March 1, 1954; (b) single premium endowment contract; or (c) single premium life insurance policy.

4407

Tax penalties not interest

Tax penalties are not deductible as interest.

4408

Accrual TP ratable deduction computation

Since you are an accrual-basis taxpayer, you must deduct your interest expense ratably over the period for which it accrues. We have adjusted your interest expense deduction as shown.

4409

Parsonage or military housing allowance/IRC 265(a)(6)

Members of clergy and military personnel are allowed to deduct mortgage interest and property taxes on their homes even though they received a parsonage allowance or military housing allowance that is excludable from income per IRC 265(a)(6).

4410

Points paid to refinance a home mortgage/not deductible in full

Points paid to refinance your home mortgage are not deductible in full in the year paid but must be deducted ratably over the period of the loan because such points are for repaying the taxpayer's existing indebtedness and are not paid in connection with the purchase or improvement of the home.

4411

Not established interest and paid/disallowed

Since you did not establish that the amount shown was (a) interest expense, and (b) paid, the amount is not deductible.

4412

Additional deduction allowed

You are allowed an additional deduction for interest expense.

4413

Personal interest not deductible

Personal interest is not deductible under IRC 163(h).

4414

Not paid during year

Since the interest expense was not paid during the taxable year, it is not deductible.

4415

Not incurred in year

Since the interest expense was not incurred during the taxable year, no deduction is allowed.

4416

Adjusted to amount verified as paid

We have adjusted your interest expense to the amount verified as paid.

4417

Evidence not presented/adjusted

Since you did not furnish acceptable documentary evidence, such as statements from banks, finance companies, etc., to verify the interest paid during the year, we have adjusted your interest expense deduction.

4418

Contingent liability

Your deduction for interest expense on a contingent liability is denied.

4419

Imputed

We have computed interest in accordance with IRC 483 because no provision was made for adequate stated interest on the sale or exchange of your property.

4420

Points must be paid by taxpayer/not from loan proceeds

The points must be paid directly by the taxpayer and may not be from loan proceeds, thus the deduction is disallowed.

4421

Accrual basis TP/cash basis for interest deduction

Accrual basis taxpayers are placed on the cash basis for the interest deduction owed to related cash basis taxpayers per IRC 267(a).

4422

Not bona fide debt

The deduction shown on your return as interest is disallowed because it has not been established that the amount was for interest on a bona fide debt.

4423

Interest paid on debt/tax exempt bonds or obligations

Deduction for interest paid on a debt, incurred or continued, to purchase or carry tax exempt bonds or other tax exempt obligation is generally denied, per IRC 265(a).

4424

Investment expense limited

Your deduction for investment expense has been limited to your net investment income.

4425

Points on a home mortgage loan/secured

Points on a home mortgage loan for the purchase or the improvement of and secured by a principal residence are deductible in the year paid to the extent that payment of the points is an established practice in the areas involved and the amount does not exceed the generally charged amount in the area, per IRC 461(g)(2).

4426

Second residence interest expense/not rented or leased

A second residence may also be treated as a qualifying residence for interest expense purposes if it was not for rent or lease during the tax year unless (a) the rented portion is used by a tenant primarily for residential purposes, (b) the rented portion is not a self-contained residential unit containing separate sleeping space and toilet and cooking facilities, and (c) the total number of tenants renting (directly or by sublease) the same or different portions of the resident at any time during the taxable year does not exceed two.

4427

Points not fully deductible in year paid

You cannot deduct the full amount of points paid to refinance your home mortgage in the year paid because such points were not paid in connection with the purchase or improvement of the home. You must spread the points over the life (term) of the mortgage. Generally you can deduct an equal portion in each year of the mortgage.

4428

Home equity interest deductible

Home equity indebtedness is all debt (other than acquisition debt) that is secured by a qualified residence to the extent it does not exceed the lesser of $100,000 ($50,000 if married filing separately) or the fair market value of the residence reduced by any acquisition indebtedness. Interest on such debt is deductible even if the proceeds are used for personal expenses.

4429

Investment income interest

The amount you can deduct for investment income interest is limited to the amount of net investment income including investment interest income you receive. See attached computation.

4430

Home equity interest not deductible (tax years 2018 - 2025)

We disallowed your home equity interest deduction. Home equity interest is not deductible for tax years 2018 through 2025, unless the loan proceeds were used to buy, build, or substantially improve your main home or second home or to refinance such debt, and the other requirements and limitations are met.

4431

Limitation on deduction for qualified residence interest

We adjusted your mortgage interest expense as shown in the attached computation. For tax years 2018 through 2025, interest is limited to the amount paid on no more than $750,000 ($375,000 in case of married filing separately) of new mortgage acquisition indebtedness incurred after December 15, 2017, unless the Binding Contract Exception applies. For indebtedness incurred on or before December 15, 2017, interest is limited to the amount paid on no more than $1,000,000 ($500,000 in case of married filing separately) of mortgage acquisition indebtedness.

Under the Binding Contract Exception, a taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, is subject to the $1,000,000 ($500,000 if married filing separately) limitation. Additionally, the loan must be secured by your main home or second home, not exceed the cost of the home, and meet other requirements.

4501

Hobby loss/not for profit-no loss and order of exp. stated

You must include on your return income from an activity from which you do not expect to make a profit. From this income, you may deduct the following expenses in the order shown:

1. interest, taxes, and other deductible items without regard to the profitability of the activity;

2. operating expenses, except those in item (c) below (to the extent gross income from the activity exceeds deductions allowable under (a) above); and

3. depreciation and other basis adjustment items to the extent gross income from the activity exceeds deductions allowable under (a) and (b) above.

4502

Personal non business property

Since the property sold was not used in a trade or business or held as income producing property, the loss on the sale is not deductible.

4503

Loss between family members

Since the loss was incurred on the sale or exchange of property between members of the same family, it is not deductible.

4504

Loss on sale between TP and corporation. (50 percent stock)

Since the loss was incurred on sale or exchange of property between yourself and a corporation in which you are considered the owner of more than 50 percent of the value of the outstanding stock, it is not deductible.

4505

Loss not deducted on trade in

The loss from this trade-in or exchange is not deductible.

4506

Loss or sale of residence

A loss on the sale or exchange of your residence is not deductible.

4507

Loss/wash sale

A loss from the sale or other disposition of stock or securities is not allowable if, within a period beginning 30 days before the date of sale or disposition and ending 30 days after the sale or disposition, you acquired or entered into a contract to acquire, substantially identical stock or securities.

4508

Loss/repossessions held for personal use

Losses on repossessions of property held for personal use are not deductible.

4509

Losses gambling limited to winnings

Your deduction for gambling losses cannot exceed the amount of your gambling winnings reported on your return.

4510

Abandonment loss disallowed

Since you did not meet your burden of proof concerning abandonment of property, i.e., shown an intention to abandon acted, in a manner consistent with that intention, and proved that abandonment actually occurred in the taxable year, your loss is disallowed.

4511

Not established loss qualifies as small bus. corp loss

We have disallowed the small business corporation loss you claimed because you have not established that the corporation qualifies as a Small Business Corporation.

4512

Small bus. corp. loss disallowed IRC 1362(d)

Since the election has been made by a small business corporation not to be treated as an S Corporation under the provisions of IRC 1362(d), we have disallowed the loss you claimed.

4513

Partnership loss limited to basis/computation

Since your distributive share of the partnership loss is limited to the extent of your adjusted basis, we have disallowed the amount in excess of your basis, as shown.

4514

Partnership interest sold/ordinary income-not capital loss computation

The sale of your interest in the partnership represents ordinary income instead of the capital gain reported, to the extent shown in the accompanying computation.

4515

Not established a loss and sustained by you

Since you did not establish that the amount shown was (a) a loss, and (b) sustained by you, it is not deductible.

4516

Additional loss allowed

You are allowed an additional deduction for the loss shown.

4517

Loss disallowed/not at risk

The loss(es) you claimed cannot be allowed because it has not been established that you are at risk within the meaning of IRC 465 in the amount of the claimed loss(es).

4518

Not incurred during year

Since the loss was not incurred during the year, we have disallowed the deduction.

4519

Personal residence rented temporarily/loss disallowed

You did not establish that your intent in renting your personal residence prior to its sale was to convert it to business property. Since information provided indicates that the loss resulted from the sale of a personal residence, we have disallowed it.

4520

Worthless securities - year not established

Since you did not establish that the securities became worthless during the year, the loss is not deductible.

4521

Rental less FRV to friend or relative/no rental loss allowable

Expenses attributable to the rental of property to a friend or relative for less than fair rental value are allowable only in the amount of the income received from this source. You may not deduct a loss from such a rental.

4522

Personal property converted to business loss (computation shown)

A loss on the sale of personal property that had been converted to business use is measured by the difference between (a) the lower of its cost or fair market value at the date of conversion, reduced by any allowable depreciation for the period it was used for business purposes, and (b) the selling price.

4523

Farm profit motive/no loss

For a farm loss to be allowable, you must show you intended to make a profit from your farming operations. This intent must be supported by actions that show that you entered into and operated your farming business in good faith for the purpose of making a profit. Since your operations do not indicate you satisfied this requirement, no loss is allowable.

4524

Forfeiture/personal residence down payment

Loss due to your failure to exercise an option to buy a personal residence (forfeiture of the down payment) is a personal expense and therefore is not deductible.

4525

Nonrecourse note not reasonable

Because your non recourse note is not reasonable in relation to the fair market value (FMV) of the underlying assets, the portion of the note in excess of the asset's reasonable fair market value is excluded from your basis. Therefore, the basis for your loss is decreased.

4526

Worthless securities - basis not established

The deduction shown on your return as a loss resulting from worthless stock is disallowed because it has not been established that the stock became worthless within the taxable year, nor has the basis of the stock been established. Your taxable income is increased accordingly.

4527

Abandonment loss/fully depreciated

Your abandonment loss is denied because the asset was fully depreciated.

4528

Related parties

Since the loss was incurred in a transaction between related parties, it is not deductible.

4529

IRC 1244 - Limitation

The excess of your IRC 1244 loss over the aggregate limit of $100,000.00 for a joint return ($50,000 for a single, separate, or head of household return) is treated as a loss from the sale or exchange of a capital asset.

4530

IRC 1244 - Continuously held by TP

Since the IRC 1244 stock was not issued directly to you and was not held by you continuously from the date of issuance, your loss is treated as a loss from the sale or exchange of a capital asset.

4531

IRC 1244 - Written plan for pre-November 1978 stock

Since your IRC 1244 stock was not issued pursuant to a plan to offer only a stated dollar amount of stock during a period specified in the plan, or the plan was not a written plan, or the plan was not was adopted by the corporation after June 30, 1958 and on or before November 6, 1978, or the stock was not offered within two years after the date the plan was adopted, your IRC 1244 loss is treated as a loss from the sale or exchange of a capital asset.

4532

IRC 1244 - did not meet requirements

If IRC 1244 stock becomes worthless, the shareholders may claim an ordinary loss rather than the usual capital loss with certain limitations and requirements as prescribed by law. Since you did not meet these requirements, we have increased your capital loss and decreased your ordinary loss.

4533

Completed transaction

Since your loss was not evidenced by a closed and completed transaction fixed by an identifiable event, it is not deductible.

4535

Demolition expenses: add to basis of land

Demolition of your building does not create a deductible loss. The basis of the land should be increased by the adjusted basis of the building, including demolition expenses.

4536

Ordinary loss disallowed

The loss you claimed does not qualify as an ordinary loss. We allowed a long term capital loss in the amount shown.

4537

Rental less FRV to friend or relative/no rental loss allowable

When property is rented to a friend, relative, or other parties for less than its fair rental value, expenses attributable to the rental are allowable only to the extent of the income received and only as itemized deductions on Schedule A. You may not deduct a loss from that rental. Therefore, we adjusted your return based on the information you furnished, and figured your tax liability accordingly.

4538

Replacement cost-not allowable

Using replacement cost as a measure of your loss is not allowable.

4539

Loss on straddle disposition - disposition of less allowable

If you dispose of less than all of the positions of a straddle, you may not take into account any loss that you realized on such disposition (the loss position) after January 23, 1985, to the extent that there is any unrecognized gain in one or more of the following positions:

1. Successor positions,

2. Offsetting positions to the loss position, or

3. Offsetting positions to any successor position.

Since you had unrecognized gain, we have adjusted your loss.

4540

Loss on straddle disposition - adjustment

Since we have adjusted the loss you claimed on the disposition of positions of a straddle, we have also adjusted your carryover loss.

4541

IRC 1231

For tax years beginning after 1984, long-term capital gain treatment is allowed only for the part of the net section 1231 gain that is more than the total of net IRC 1231 losses from the 5 most recent preceding tax years that have not already been recaptured, using this rule, in the prior tax years. The part of the net IRC 1231 gain that does not exceed total net IRC 1231 losses described in the previous sentence is ordinary income. Only net IRC 1231 losses from tax years beginning after 1981 are used in making this calculation.

4542

Property transfer to spouse disallowed

No loss or gain is recognized on a property transfer after July 18, 1984, from an individual to a spouse. We have adjusted the loss (or gain) you claimed.

4543

Financial institution not federally insured

The loss on funds deposited in a qualified financial institution which becomes insolvent may be deductible as an ordinary loss if the funds were not federally insured. The amount of loss that may be deducted by a qualified individual making a IRC 165(l) election for the taxable year is limited to $20,000 ($10,000 if married filing separate). An adjustment has been made to your deduction because you exceeded the limitation for your filing status.

4544

Not an active trade or business

Because we determined that the activity described on your Schedule C does not meet the guidelines of carrying on a trade or a business within the meaning of IRC 162, we disallowed your loss.

4545

Limit on excess business losses

We adjusted your excess business losses as shown in the attached computation. Excess business losses are limited to $250,000 ($500,000 in case of a joint return). The threshold amount is indexed for inflation.

4601

AGI increased/computation

Only the amount of medical expenses that exceeds a certain percentage of your adjusted gross income is deductible. Since your adjusted gross income has been changed, we have adjusted your medical expense deduction as shown in the accompanying computation.

4602

Life insurance

Premiums paid for life insurance policies are not deductible as medical expenses.

4603

Loss of earnings/Loss of limb, sight, etc.

Premiums paid for policies which reimburse you for loss of earnings or for the accidental loss of life, limb, sight, etc., are not deductible as medical expenses.

4604

Guaranteed specified amt. per day, week month, etc., not qualified

Premiums paid for policies that guarantee a specified amount each day, week, or month in the event of hospitalization are not deductible as medical expenses.

4605

Reimbursements reduce deduction

Your medical expense deduction is reduced by the reimbursements you actually received.

4606

Other than for TP, spouse or dependent

Since the medical expense was not paid for yourself, your spouse, or your qualified dependent, the amount is not deductible as a medical expense.

4607

Personal analysis as part of training

Payments for personal analysis required as part of your training are not deductible as medical expenses.

4608

Cosmetics, toiletries, etc.

Payments for cosmetics, toiletries, toothpaste, and like items are not deductible as medical expenses.

4609

Items not generally accepted as medicines

Payments for items that are not prescription drugs or insulin are not deductible as medical expenses.

4610

Special diets and foods substitute for regular diet

The cost of special foods or beverages that you substitute for those you normally consume is not deductible.

4611

Nursing home expense not allowed-primary purpose not medical

Since medical care is not the primary reason for your being in a nursing home, rest home, or other institution, the cost of meals and lodging is not deductible.

4612

Travel for medical care-meals not deductible

The cost of meals while traveling to obtain medical care is not deductible.

4613

Transportation primarily for and essential to medical care

Amounts paid for transportation are allowable medical care expenses only if the transportation is primarily for and essential to medical care.

4614

Trip to improve general health or change environment

A trip taken to change environment or generally improve health is not deductible as a medical expense, even when the trip is made on the advice of a physician.

4615

Capital expenditures only to extent exceeds increase in FMV

Only the costs of permanent improvements made to property for medical reasons that are more than the increase in the fair market value of the property are deductible.

4616

Household help

The cost of a household assistant must be allocated between allowable nursing or other medical care activities, and nondeductible household cleaning, etc., expenses. Only the medical activity percentage of the cost is deductible as a medical care expense.

4617

Funeral expenses

Funeral and burial expenses are not deductible.

4618

Not established that medical expense and paid

Since you did not prove that the amount shown was (a) a medical expense, and (b) paid during the taxable year, the amount is not deductible. See IRC 213.

4619

Additional deduction allowed

You are allowed an additional deduction for medical expenses.

4620

Adjusted as shown in computation

We adjusted your medical expense deduction as shown in the attached computation.

4621

Cancelled checks alone not adequate for drugs

Since many nondeductible items can be bought at drug stores, cancelled checks alone are not considered adequate verification of payment for drugs and medicines reported on your return. We have, therefore, reduced the amount you claimed to the expenses you verified as paid for drugs and medicines.

4622

Exemption disallowed-so, too, medical expenses claimed

Since we disallowed the exemption you reported, you may not deduct the medical expenses you paid for that individual.

4623

Not a qualifying expense

This item does not qualify as an allowable medical expense deduction per IRC 213.

4624

Auto expense or transportation to work (even if specially equipped)

The cost of transportation to and from work, even if your condition requires an extraordinary mode of transportation, does not qualify as a medical expense. It is a personal expense and is not deductible.

4625

Paid - by dependent

You may not deduct medical expenses paid by your dependent.

4626

Auto expense limited to gas and oil-no depreciation or repairs

Automobile expenses for medical travel are allowable only for out of pocket expenditures for such items as gas, oil, and parking fees. In the absence of evidence of actual expenses incurred, you can substitute the applicable standard rate.

4627

Allowed to extent verified

Your medical expenses have been allowed in the amount verified as having been paid during the taxable year.

4628

Acceptable evidence of med. expenses not furnished

Since you did not furnish acceptable documentary evidence, such as statements from doctors or hospitals, canceled checks, receipts, etc., to verify medical expenses paid during the year, we adjusted your medical expense deduction.

4629

Acceptable evidence to establish medical insurance not furnished

Since you did not furnish acceptable documentary evidence, such as pay stubs, statements from insurance companies, etc., to verify medical insurance paid during the year, we have adjusted your medical expense deduction.

4630

Insurance reimbursement not verified

This deduction is disallowed since you did not indicate the amount, if any, received for reimbursement of medical expenses. In order to allow your deduction, we will require written verification from your insurance carrier stating the amount they paid for these expenses.

4631

Math error in medical deduction

We adjusted your return to correct a math error in your medical deduction. See attached corrected computation.

4632

Increase in AGI

Due to the increase in the amount of your adjusted gross income, your medical expense deduction is decreased. Therefore, your taxable income is increased.

4633

Deduct lodging expense but not meals

The cost of lodging while traveling to obtain medical care is allowable, up to $50 for each night for each individual, but only if :

1. the trip is primarily for and essential to medical care,

2. the care is provided by a physician in a licensed hospital (or equivalent facility),

3. the lodging is not lavish or extravagant under the circumstances, and there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

Since you have not established that the trip satisfied each required element, we have disallowed your deduction.

4634

Meals not deductible

The cost of meals while you are away-from-home for medical care or for the alleviation of a specific condition is not deductible as a medical expense.

4635

Limitation on allowable away from home expense

The allowable away-from-home lodging expense for medical care is limited to $50 per night for the individual seeking medical care and for an eligible person whose presence is medically necessary accompanying this individual.

4636

Personal pleasure while away from home for medical not deductible

Since lodging expenses for medical care are not deductible if there is any significant element of personal pleasure, recreation, or vacation in the away-from-home travel, we disallowed your deduction.

4637

AGI-expense limitation

Your medical expense is allowable only to the extent it exceeds 7.5 percent of your adjusted gross income. Therefore, we have adjusted your deduction as shown in the attached computation.

4638

Divorced or separated parents claim their paid expenses

If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she pays for the child. We have adjusted your deduction to the amount you paid.

4639

Animal expense

The cost of obtaining and maintaining an animal are deductible as medical expenses only for an animal that assists an individual with handicaps.

4640

Health/hospitalization Insurance claimed as adjustment to AGI

The portion of your health and hospitalization insurance you claimed as an adjustment to gross income, because you are self-employed, cannot also be included in your medical expenses. We made an adjustment to remove the duplicated amount.

4701

Reimbursement reduces deduction

We have reduced your moving expense deduction by the amount you received as a reimbursement.

4702

Work test not met: 39 weeks

Since you were not a full-time employee in the general location of your new principal place of work for at least 39 weeks during the 12-month period immediately following your arrival, you cannot deduct moving expenses.

4703

One year limitation

Since the move did not take place within 1 year from the date you first reported for the new job, you must explain the reason for the delay in order to deduct moving expenses.

4704

Family members only

Since a servant, governess, chauffeur, nurse, valet, or personal attendant is not a member of your household, the moving expense for that individual is not deductible.

4705

Moving and storage expenses furnished in kind/military active duty

Moving and storage expenses that are furnished in kind by the military or cash reimbursements or allowances to the extent of expenses actually paid or incurred incident to a permanent change of station for a member of the U.S. armed forces on active duty are not includible in income.

4706

Living expenses incurred before move

Living expenses incurred before or after the move are personal and, therefore, are not deductible.

4707

Distance test not met: 50 miles

A moving expense deduction is allowed only when the distance between your new business location and your former residence is at least 50 miles farther than the distance between your former business location and your former residence.

4708

Work test not met: 78 weeks

Since you were not a full time employee or self-employed on a full-time basis for at least 78 weeks during the 24 months following the move (of which 39 weeks must be in the first 12 months), your moving expenses are not deductible.

4709

Not established as moving expense and paid/disallowed

Since you did not establish that the amount shown was (a) a moving expense, and (b) paid, the amount is not deductible.

4710

Additional allowance

You are allowed an additional deduction for moving expenses.

4711

Not paid in tax year

Since these moving expenses were not paid during the year, we disallowed your deduction.

4712

Adjusted / computation

We adjusted your deduction for moving expenses as shown in the attached computation.

4713

Auto expenses allowed at standard rate

We figured your allowable deduction for car expenses related to moving at the applicable standard rate.

4714

Foreign source excluded income/IRC 911/ comp.

Moving expenses are directly related to the employment for which the move was made. To the extent that foreign source earned income from that employment is excluded from income under IRC 911, the moving expense is reduced. The amount disallowed is shown in the attached computation.

4715

Verification allowed to extent of

We adjusted your moving expense deduction to the amount verified as paid.

4716

Loss on sale of home

Neither home improvements made to help sell your home nor a loss on the sale of your home are deductible moving expenses.

4717

In-transit expense (insurance/storage)

We adjusted your moving expenses, because storing and insuring household goods and personal effects are in-transit expenses if incurred within any period of 30 days in a row after the day the goods and effects are moved from your er home and before delivery to your new home.

4718

Allowed storage costs/home outside of U.S.

You are allowed a deduction for moving household goods and personal effects to and from storage and storing them for part or all of the time that your new place of work outside the United States continues to be your principal place of work. Your moving expenses were adjusted to reflect this allowance.

4719

Move exp allowed/spouse worked outside of U.S. at time of death

You are allowed a deduction for moving expenses for a move to a home in the United States, since you were the spouse or dependent of a person whose principal place of work at the time of death was outside the United States and the move was to a residence in the United States from a former residence outside the United States which (as of the time of the decedent's death) was the residence of you and the decedent.

4720

Moving exp disallowed/began more than 6 months after spouse death

For you to deduct moving expenses as the spouse or dependent of a person whose principal place of work at the time of death was outside the United States, your move must begin within 6 months after that person's death. Since your move began after this time period, your moving expenses are not deductible.

4721

Retirement relocation and allowed

You may deduct moving expenses for a move to a home in the United States in connection with your retirement if both your principal place of work and your home were outside the United States and its possessions. You are allowed a deduction for moving expenses as shown.

4722

Payment exceeds moving expenses/not member of united services

If you are not a member of the united services, any amount you received from your employer for moving expenses that exceeds actual expenses is includible in income.

4723

Moving expenses disallowed (non-military) (tax years 2018-2025)

We disallowed your moving expenses. Moving expenses are not deductible in tax years 2018 through 2025 unless you are a member of the U.S. Armed Forces on active duty who moves pursuant to a military order and incident to a permanent change of station.

4724

Moving expense reimbursement included in income (non-military) (tax years 2018-2025)

We included your moving expense reimbursement in your gross income. For tax years 2018 through 2025, moving expense reimbursements from your employer are not excludable from gross income.

4801

Prorated to reflect business portion used/percentage of time used

Since your deduction for office-in-the-home expense must be figured by dividing the expense for operating your entire home between the expense for the part used for personal purposes and the part used for business, we adjusted your deduction as shown in the attached computation.

4802

Necessary for work performance not established-disallowed

Since the business use of a part of your home is for your work as an employee, but the use is not for the convenience of your employer, we disallowed your deduction for an office-in-the-home.

4803

Personal portion of residence

You cannot deduct any expense for the personal part of your home as an office-in-the-home expense.

4804

Personal lawn care and landscaping

You cannot deduct any expenditures for personal items such as lawn care and landscaping as an office-in-the-home expense.

4805

Personal repairs

You cannot deduct any repairs made to the personal portion of your residence as an office-in-the-home expense.

4806

Not established office in home expense and paid/incurred

Since you did not prove that the amount shown was (a) office-in-the-home expense, and (b) paid or incurred, the amount is not deductible.

4807

Additional deduction allowed

You are allowed an additional deduction for office-in-the-home expense.

4808

Itemized deduction only-did not itemize-cannot claim

Since these office-in-the-home expenses are deductible only as itemized deductions, and you did not itemize, we disallowed this deduction.

4809

Not established required by employer

We have disallowed your deduction for office-in-the-home expense because you have not established that it was for the convenience of your employer. Voluntary, occasional, or incidental use of part of your home in connection with your employment does not entitle you to a business deduction for the expenses incurred.

4810

Regular and exclusive test not met

Since the part of your home used for business was not used regularly and exclusively for that purpose, we disallowed your deduction for business use of your home.

4811

Gain recognized/computation/general deduction not met/disallowed

Employment and business related expenses attributable to the use of a distinct portion of a residence (e.g., den or office) are allowed only if the portion of the residence is exclusively used on a regular basis as the taxpayer's place of business, or as a place of business which is used by patients, clients, or customers. In addition, for an employee, the use must be for the convenience of the employer. Since you have not established that you meet these requirements we disallowed the deduction claimed.

4812

Depreciation for office in home cannot be deferred

If a portion of the property was used for residential purposes and a portion of the property was used for non-residential purposes, only the gain allocable to the residential portion is excludable under IRC 121. However, no allocation is required if both the residential and non-residential portions of the property are within the same dwelling unit. Treas. Reg. 1.121-1(e)(1). In addition, a taxpayer cannot exclude the gain up to any depreciation allowed or allowable as a deduction for periods after May 6, 1997.

4813

Limits on deductions

The deduction for business use of your home is limited to the gross income from the business or rental use of the unit, reduced by the sum of the percentage of the otherwise deductible mortgage interest, real estate taxes, losses from casualty and theft, and deductions allocable to the business or rental activity but not allocable to the use of the unit itself. Expenditures required for the activity but not allocable to the use of the unit itself, such as expenditures for supplies and compensations paid to other persons, are not subject to the gross income limitation.

4814

Test for home office

In order to qualify for a home office deduction there are certain tests that have to be met. The office area must be used exclusively and regularly for business. Exclusively means you must use the area of your home only for conducting business. If any part of this area is used for personal purposes you have not met the exclusive use test. Regular use means that you use the exclusive business area on a continuing basis. The occasional or incidental business use of an area in your home does not meet the regular use test even if that part of your home is used for no other purpose.

In addition, home office deductions are limited by IRC 280A to the gross income from that business activity reduced by the sum of the percentage of the otherwise deductible mortgage interest, real estate taxes, losses from casualty and theft, and deductions allocable to the business or rental activity but not allocable to the use of the unit itself.

Since you have not met the requirements for the home office deduction for the above reasons, all the expenses have been disallowed.

4815

Not established principal place of business

We disallowed the office-in-the-home deduction because your home is not your principal place of business.

4816

Rental to employer-home office expenses

If you rent all or part of your residence to your employer and use the rented portion when performing services for that employer, you cannot deduct home office expenses attributable to the rental.

4817

Gross income limitation - IRC 280A

The portion of home office expense disallowed because of the gross income limitation under IRC 280A can be carried forward in the same business to subsequent taxable years. The expense that is carried forward to a subsequent taxable year will be subject to the gross income limitation in that year.

4818

Cannot deduct base rate of first telephone line after 1988

You cannot deduct the base rate of the first telephone line into your residence as an office-in-home-expense.

4819

Limitation on home office deductions

Home office deductions are limited, by IRC 280A, to the gross income from that business activity reduced by the sum of the percentage of the otherwise deductible mortgage interest, real estate taxes, losses from casualty and theft, and deductions allocable to the business or rental activity but not allocable to the use of the unit itself.

4820

Office-in-the-home disallowed as itemized deduction (2 percent misc. itemized not allowable)

We disallowed your office-in-the-home deduction. For tax years 2018 through 2025, miscellaneous deductions that are subject to the 2 percent adjusted gross income limitation are not deductible. Office-in-the-home expense is subject to the 2 percent adjusted gross income limitation, so it is not deductible.

4901

Excess loss denied

Passive losses and credits can be offset by passive income (or in the case of credits, to the tax attributable to net passive income). Passive losses are also allowed to the extent they qualify for the special allowance for rental real estate activities. They cannot be used to offset portfolio income. Since your losses from such activities were in excess of the passive income and the special allowance, the excess loss has been denied. You may carry forward the amount of the loss you were unable to claim.

4902

Passive activity defined

Passive losses can only be offset against passive income. A passive activity is one involving the conduct of a trade or business in which you do not materially participate, or any rental activity unless the requirements of IRC 469(c)(7) are met in tax years beginning after December 31, 1993.

4903

Rental activity/IRC 469(c)(7)

Rental activities of any kind, regardless of material participation, are considered passive activities unless the requirements of IRC 469(c)(7) are met in tax years beginning after December 31, 1993.

4904

Partnerships and S corporations

Passive losses and credits include those passed through to partners and shareholders by partnerships and S corporations from activities that are passive to the taxpayer.

4905

Passive loss can be carried forward indefinitely

Although your loss and/or credit from a passive activity has been denied, it may be carried forward indefinitely.

4906

Mortgage interest expense/IRC 469(j)(7)

Under IRC 469(j)(7), Passive Activity Loss of a taxpayer shall be computed without regard to qualified residence interest. The mortgage interest expense that you incurred on your qualified residence is to be deducted on Schedule A as an itemized deduction, and not on Schedule E.

4907

Passive activity loss carryover

We have adjusted your passive activity loss as shown. This may affect your loss available for carryover to subsequent years. See the enclosed Form 8582, Passive Activity Loss Limitations, and Pub 925, Passive Activity and At-Risk Rules, containing information and examples for reporting losses from passive activities.

5001

Prorated to reflect personal and rental portion

You are entitled to deduct as rental expenses only those items which relate to the rental portion of your property.

5002

Property not rented at time of expense

Since the expenses were incurred before the property was ready and available to be rented, they must be capitalized and recovered through depreciation.

5003

Verification not shown that expense is rental and paid

Since you did not prove that the amount shown was (a) rental expense, and (b) paid, the amount is not deductible.

5004

Additional deduction allowed

You are allowed an additional deduction for rental expenses.

5005

Not paid during year

Since the rental expenses were not paid during the taxable year, they are not deductible.

5006

Adjusted as shown

Your rental expense deduction has been adjusted as shown.

5007

Incurred other than during taxable year

Since the related expense was not incurred during the taxable year, we have disallowed the deduction.

5008

Conversion to personal-expenses are not deductible

Expenses incurred for the purpose of converting rental property back to personal use are personal, nondeductible expenditures.

5009

Loss/limited to amt. received for rent

Since you used your home as your personal residence while it was rented, your expense deductions are limited to the income you received as rent. You may not deduct a loss from this rental.

5010

Passive activity loss limited

Because the loss you deducted was determined to result from a passive activity, your loss is limited to the amount of income from all passive activities. The amount disallowed because of this may be carried forward to reduce passive activity income generated in future years.

5011

Non passive income limit - $25,000

Active participants in rental activities are allowed to offset up to $25,000 ($12,500 if married filing separate) of nonpassive income with the net losses from all rental activities, subject to phase-out. Because your net loss from these activities was under the limitation, your expenses have been allowed as verified.

5012

Net operating losses

You did not have enough nonpassive income (within the limitation) to absorb the net losses from the rental activities in which you actively participated. Your otherwise allowable losses are therefore treated as losses which are not from a passive activity, and are treated as net operating losses which will be carried back and forward in accordance with the rules applicable to net operating losses. See the attached computation.

5013

Deduction for bed and breakfast disallowed

You did not provide adequate verification to qualify your home as a Bed and Breakfast. Therefore, we have disallowed the deduction.

5014

Deduction for bed and breakfast allowed

We have allowed an additional deduction for your Bed and Breakfast.

5015

Non passive income limit - $25,000 – modified AGI phase-out

Active participants in real property rental real estate activities are allowed to offset up to $25,000 ($12,500 if married filing separate) of non-passive income with the net losses from all rental activities, subject to phase-out. To qualify for the $25,000 offset against wages and portfolio income, you must actively participate, own at least 10 percent and not be a limited partner. The $25,000 exception is phased out at the rate of $.50 for every dollar of modified AGI over $100,000. Based on the calculation of your modified adjusted gross income, you are subject to the phase-out and the amount of your passive activity loss has been limited as shown on this report.

5101

Reconditioning or altering the property is not a repair

Amounts spent as part of a general plan of reconditioning, improving, or altering your property are not deductible as repairs.

5102

Value of property increase life extended-not repairs

You may not deduct amounts spent which increase the value of property, extend its useful life, or make it adaptable to a different use.

5103

Not established that expense was for repairs and paid

Since you did not prove that the amount shown was (a) for repairs, and (b) paid, the amount is not deductible.

5104

Additional deduction allowed

You are allowed an additional deduction for repair expenses.

5105

Adjusted to the amount verified as paid

We have adjusted your deduction for repair expenses to the amount verified as paid.

5201

Federal taxes not deductible

You cannot deduct federal income tax, federal excise tax, federal social security tax, regulatory license fees, or water or gasoline tax.

5202

Social security taxes/employer

You are allowed as a trade or business expense your share of Social Security taxes as an employer.

5203

Sales taxes collected and incurred

You are allowed a deduction for sales taxes collected and included in income in the course of your trade or business.

5204

State and local tax deduction adjusted/disallowed amount on Form W-2

Since we have disallowed the income amount shown on your Form W-2, we have adjusted your state and local tax deduction claimed on Schedule A by the amount of state withholding shown on your Form W-2.

5205

Special assessments not taxes

Special assessments must be added to the cost of the property and are not deductible.

5206

Apportion real estate taxes between buyer/seller/computation

Real estate taxes in the year a property is sold must be apportioned between the buyer and the seller according to the number of days in the year that each held the property. See the accompanying computation.

5207

Ownership of property not by taxpayer

You cannot deduct taxes on property unless you own the property.

5208

State income tax paid on exempt income

You cannot deduct state income tax on income (except interest) which is exempt or excludable for federal income tax purposes.

5209

Local sales tax not deductible after 1986 and prior to 2004

You may not deduct these taxes since they were the expenses of another taxpayer.

5210

Penalties are not deductible

Penalties are not deductible.

5211

Accrual basis

Since you are an accrual-basis taxpayer you must deduct your tax expense ratably over the period in which it accrues. We have adjusted your deduction, as shown in the accompanying computation.

5212

Foreign taxes-nonqualifying

The only foreign taxes you may deduct are income, war profits, excess profits, and real property. Since the tax you claimed is not in a deductible category, we have disallowed it.

5213

FICA tax-excess is a credit

We have disallowed the deduction you claimed for FICA tax. Excess FICA tax withheld from your wages is allowed as a credit against your tax liability.

5214

FICA taxes are not deductible

Your own FICA tax may not be claimed as a deduction.

5215

Income taxes w/h from wages are not deductible

Federal income tax withheld from wages is not deductible.

5216

Foreign tax claimed as credit

Since you claimed a tax credit for the foreign income tax you paid, we have disallowed your itemized deduction for that tax.

5217

Additional deduction allowed

You are allowed an additional deduction for taxes.

5218

Adjusted as shown in computation

We have adjusted this deduction for taxes, as shown in the accompanying computation.

5219

Not incurred during year

Since this tax expense was not incurred during the taxable year, we have disallowed it.

5220

Allowed to extent verified as paid

We adjusted your deduction for taxes to the amount verified as paid.

5221

State gas tax is not deductible

State taxes on gasoline are not deductible.

5222

Auto registration fees

A deduction claimed for taxes is disallowed because the amount is for automobile registration fees which are not taxes.

5223

Real estate taxes

We reduced your real estate tax deduction by the amount of taxes allowed as a trade or business expense.

5224

Unallowable mortgage tax

If you received a mortgage when you acquired or refinanced real property and paid a tax on the mortgage, it is not a deductible real property tax but it is a capital expenditure added to the cost basis of the property. It is not allowable as an itemized deduction. Refer to IRC 162(a) and IRC 263(a).

5225

State and local income, sales and property taxes (tax years 2018-2025)

We adjusted your itemized deduction for taxes paid. State and local income, sales, and property taxes are limited in total to $10,000 ($5,000 if married filing separately) for tax years 2018 through 2025.

5301

Not established ordinary and necessary

Since you did not establish that these tools were ordinary and necessary in your employment, their cost is not deductible.

5302

Capitalize over useful life-not current expense

These tool costs are not deductible in the year of purchase, but must be capitalized and depreciated over their estimated useful lives.

5303

Lost/stolen - cost deducted in prior years and not allowed

Since the cost of these lost or stolen tools was deducted or should have been fully depreciated in prior years, we disallowed the deduction for them.

5304

Additional deduction allowed

You are allowed an additional deduction for work tools.

5305

Not bought during tax year

Since these work tools were not bought during the tax year, their cost is not deductible.

5306

Adjusted to amount verified as paid

We adjusted your deduction for work tools to the amount verified as paid.

5307

Cost changed due to adjustment to AGI

The cost of tools is deductible only as a miscellaneous deduction. Miscellaneous deductions are subject to the 2 percent of adjusted gross income limitation. Since changes made elsewhere in this report affect your Adjusted Gross Income, we have adjusted your deduction for tools.

5308

Cost of tool not over 2 percent - denied

The cost of tools is deductible only as a miscellaneous deduction. Miscellaneous deductions are subject to the 2 percent of adjusted gross income limitation. Since the amount you verified for total miscellaneous deductions does not exceed this limit, your deduction for cost of tools has been adjusted accordingly.

5401

Used the standard rate/depreciation not deductible

Since you used the standard rate in figuring your car expenses for business purposes, the depreciation for this travel is not deductible.

5402

Allowed at standard rate

We figured your allowable deduction for business use of your automobile at the standard business mileage rate.

5403

Auto expense/actual method

Your allowable car expense deduction using the actual method is limited to the total expense times the percentage of the total miles driven for business purposes.

5404

Business travel/more than one year

You cannot deduct business travel expense paid or incurred for away from home assignments that last for more than one year at a single location. These assignments are no longer considered temporary.

5405

Commuting/home to any business location

The cost of commuting between your residence and your regular place of employment within the general area of your tax home is not deductible.

5406

Cost of meals/overnight

The cost of meals are not deductible as travel expenses unless you were away from home overnight, or long enough that you needed to sleep or rest to properly per your duties. Therefore, we have adjusted your meals expenses deduction, as shown in the attached computation.

5407

Not away from tax home

Since you were not away from your tax home when you incurred the travel expenses, they are not deductible.

5408

Not established/amount, time, business purpose

To be allowed a deduction for any traveling expense, you must furnish information to prove:

1. the amount of the expense,

2. the time and place of the travel,

3. the business purpose of the travel, and

4. the time the expense was paid or incurred.

Because you have not established all of the above, we have disallowed your deduction.

5409

Additional allowed

You are allowed an additional deduction for business travel or transportation expenses.

5410

Trans. (medical and charitable) since did not itemize cannot deduct

Since medical or charitable travel or transportation expenses are deductible only as itemized deductions, and you did not itemize, we disallowed the deduction.

5411

Not paid during year

Since the travel or transportation expenses were not paid during the taxable year, they are not deductible.

5412

Adjusted as shown/computation

We have adjusted your travel or transportation deduction as shown.

5413

Not incurred during year

Since the travel or transportation expense was not incurred during the taxable year, we disallowed the deduction.

5414

Reimbursement not claimed from employer/no deduction

Since you failed to claim from your employer a reimbursement to which you are entitled for travel and transportation expense, you may not claim a deduction for these expenses.

5415

Adequate records and documentary evidence (IRC 274)

No deduction is allowed for any expenditure for business travel away from home (including meals and lodging) unless you keep adequate records and documentary evidence to substantiate this expense. To meet the records requirement, you must maintain the following:

1. An account book, diary, or statement of expenses, with entries made at or near the time of each necessary business expense. You must show the amount spent, the time and place of travel, and the purpose of the business.

2. Available documentary evidence that will identify the expense, such as receipts, paid bills, or canceled checks. Estimates do not qualify as substantiation of these expenses.

Since it has not been shown that you meet all of the above requirements, we disallowed your deduction.

5416

Tax home defined

Although "home" ordinarily means the place where you and your family live, your tax home is the entire city or general area in which your principal place of business, employment station, or post of duty is located. Since your expenses were incurred at your tax home, they are not deductible as away-from-home expenses.

5417

No tax home

If you move from job to job, maintaining no fixed place of abode or business locality, each place where you work becomes your principal place of business and your tax home. Therefore, you may not deduct your expenses for travel, meals, and lodging.

5418

Indefinite period

If your job at the new location is expected to last for an indefinite period (that is, if its end cannot be foreseen within a fixed and reasonably short period), that location then becomes your new tax home. Therefore, you may not deduct the expenses of travel, meals, and lodging while there, and any reimbursement or per diem received are includible in income.

5419

NR alien/no principal place of business in home country

As a nonresident alien, you are not allowed a deduction for travel and living expenses unless you had a principal place of business in your home country before coming to the United States, and were temporarily absent from it while in the United States.

5420

Family member expense/not deductible

A deduction for travel and transportation is allowable only for your own expenses. The part of the expense allocable to other members of your family is not deductible.

5421

No accounting to employer/reimbursement/verified expenses allowed

Since you did not account to your employer for your business expenses, they are subject to verification. Your employer's reimbursements have been included in your income, and expenses for meals, lodging, and other business items have been allowed in the amount verified.

5422

Business usage/portion allowed

Your expense was allowed in the amount determined to apply to business use.

5423

Spouse expense/bona fide business purpose

No deduction is allowed for expenses attributable to a spouse accompanying the taxpayer on a business trip unless the spouse is an employee of the taxpayer, is traveling for bona fide business purposes, and the expenses are otherwise allowable.

5424

Convention not ordinary and necessary

Since you failed to show that your attending a convention benefited or advanced the interests of your business or your own work as distinguished from the business or work of another, your convention expenses within the United States are not deductible.

5425

Below 2 percent AGI

The amount you verified for total miscellaneous itemized deductions was below the 2 percent adjusted gross income floor. Therefore, we have disallowed your deduction for unreimbursed employee business expenses.

5427

Allowable meals at 50 percent

Only 50 percent of the otherwise allowable meals away from home are deductible. This applies to either the amount actually spent, or the standard meal allowance.

5428

No regular place of employment

Because you have no regular place of employment, the cost of commuting between your residence and any business location within the general area of your tax home is not deductible.

5501

Gen'l use/adaptable for

Since these work clothes are adaptable to general use, the cost cannot be deducted.

5502

Gen'l use/adaptable for/care expenses

Since these work clothes are adaptable to general use, the cost of caring for them is not deductible.

5503

Gen'l requirements defined/since not met

To be allowed a deduction for work clothes, you must furnish information to prove, (a) payment was actually made during the tax year, (b) the clothes were ordinary and necessary to your business or profession, and (c) the clothes are not adaptable to general use. Since you did not meet these requirements, we disallowed the amount shown.

5504

Additional deduction allowed

We allowed an additional deduction for special work clothes purchased during the tax year.

5505

Itemized deduction only

Since the cost of these work clothes is deductible only as an itemized deduction, and you did not itemize, we disallowed it.

5506

Not purchased during year

Since these work clothes were not bought during the tax year, their cost is not deductible.

5507

Adjusted as shown in computation

We adjusted your deduction for work clothes as shown.

5508

Work clothes suitable for general wear

Your work clothing is suitable for general wear and can take the place of ordinary clothing; therefore, the cost and expense of its maintenance are not deductible.

5509

Cost is miscellaneous deduction-less than 2 percent AGI

The cost of work clothes is deductible only as a miscellaneous deduction. Miscellaneous deductions are subject to the 2 percent adjusted gross income limit. Since the amount you verified for total miscellaneous deductions does not exceed this limit, your deduction for work clothes has been denied.

5510

Allowed/verified as paid during the tax year

Your work clothing expense has been allowed in the amount verified as having been paid during the taxable year.

5601

Repayment of unemployment compensation/ misc 2 percent deduction

Unemployment compensation repayments of amounts that were included in income in an earlier year may be deducted on Schedule A as a miscellaneous deduction subject to the 2 percent limitation.

5602

Personal living or family expenses not allowable

You may not deduct personal living or family expenses, other than those specifically provided for by law.

5603

Value of time or labor not deductible

The value of your time and labor is not deductible.

5604

Special assessments/property taxes

Special assessments are not deductible as property taxes, except for any portion the taxpayer can show is deductible as a charge for maintenance, repair, or interest.

5605

Not established paid, incurred or ordinary and necessary/ disallowed

Since you did not establish that the business expense shown on your tax return was paid or incurred during the taxable year and that the expense was ordinary and necessary to your business, we have disallowed the amount shown.

5606

Closing costs/residence

We have disallowed the amount you deducted as expenses incurred in the sale or purchase of your home. You may not deduct personal living or family expenses, other than those specifically provided for by law. Closing costs are nondeductible capital expenditures. The amount paid to purchase a home should be added to the basis. The amount paid to sell a home should be added to the selling expense.

5607

Job hunting expenses

Since you did not establish that you meet the requirements for a deductible job hunting expense, we disallowed the amounts claimed.

5608

Establishing of business

Expenses incurred in establishing a business before the time business begins must be capitalized rather than deducted in the year incurred.

5609

Not incurred looking for a new job in present trade or business

These expenses are not allowable because you did not incur them in looking for a new job in your present trade or business.

5611

Allowed expense up to amount of income as misc. deduction

Since we disallowed your loss as an activity not engaged in for profit, we allowed your expenses up to the amount of income as a miscellaneous deduction on Schedule A.

5612

Legal fees/purchase of property

Legal expenses are not deductible when they are for the purchase of property held for the production of income or used in a trade or business. These costs are capitalized by adding them to your basis in the asset.

5613

Election to expense/IRC 179 Property

Property which is used predominantly to furnish lodging or in connection with the furnishing of lodging does not qualify as IRC 179 property and is not eligible for the expense deduction. We have adjusted your IRC 179 expense deduction, as shown in the attached computation.

5614

Expenses adjusted due to change in AGI

Certain expenses deducted as miscellaneous itemized deductions are only deductible to the extent that they exceed a percentage of your adjusted gross income. Since we have made other changes in this report which affect your adjusted gross income, we have also adjusted these expenses.

5615

Personal expenses rather than business

We have disallowed the expenses you claimed as business expenses because it was determined they were personal expenses and not deductible.

5616

Telephone base rate-first phone (after 1988)

No amount is deductible for any part, including taxes, of the base rate on the first telephone line in your residence.

5617

Employee business expenses on Line 27

Since the expenses you reported on Schedule A, Line 27, are employee business expenses, they are subject to the 2 percent adjusted gross income floor. This adjustment does not affect your Schedule A deduction because provide reason, but it does affect the computation of the alternative minimum tax.

5618

Sch C expenses moved to Sch A

We have adjusted Schedule A to include the deductions you improperly claimed on Schedule C. We have included your disallowed Schedule C deductions on Line 20 of Schedule A as employee business expenses, which are subject to the 2 percent adjusted gross income floor.

5619

Tuition and fees deduction

To be eligible for the tuition and fees deduction, married persons must file a joint return. Since we changed your filing status to married filing separately we disallowed the deduction.

5620

Student loan interest deduction

To be eligible for the student loan interest deduction, married persons must file a joint return. Since we changed your filing status to married filing separately we disallowed the deduction.

5621

Certain deductible expenses adjusted

Certain deductible expenses are limited by income, contributions, and/or a specific dollar amount. Since the credit you claimed either exceeds the limit or your income was changed by adjustments made to your return, the deductible portion of your expense changed.

5622

Job expenses and certain misc. deductions

Since you have not substantiated the amounts claimed for Job Expenses and Certain Miscellaneous Deductions, we disallowed the amounts claimed.

5623

Telephone excise tax -total disallowance

We have disallowed the telephone excise tax refund you requested on your return because you did not provide the documentation requested to support the refund amount claimed.

5624

Telephone excise tax - partial disallowance

We changed the telephone excise tax refund you requested on you tax return based on the information you provided.

5625

Telephone excise tax - disallowance down to standard amt. for individuals only

We changed the telephone excise tax refund you requested on your return to the standard amount. The standard amounts are $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.

5626

Miscellaneous itemized deductions subject to the 2 percent AGI limitation (tax years 2018 – 2025)

We disallowed your miscellaneous itemized deductions. For tax years 2018 through 2025, miscellaneous deductions that are subject to the 2 percent adjusted gross income limitation are not deductible.

5627

Statutory adjustment to QBID based upon other return changes made

As a result of changes made to your tax return, the qualified business income deduction previously claimed was adjusted as shown on the attached report. For tax year 2018, you can find more information on the qualified business income deduction in the Form 1040 instructions or within Pub 535, Business Expenses. For tax years 2019 and later, you can find more information in the instructions to the Form 8995, Qualified Business Income Deduction Simplified Computation, or Form 8995-A, Qualified Business Income Deduction.

5628

Adjustment to QBID

The qualified business income deduction claimed was adjusted as shown on the attached report. For tax year 2018, you can find more information on the qualified business income deduction in the Form 1040 instructions or within Pub 535, Business Expenses. For tax years 2019 and later, you can find more information in the instructions to the Form 8995, Qualified Business Income Deduction Simplified Computation, or Form 8995-A, Qualified Business Income Deduction.

5701

Adjusted due to time of contribution

We have adjusted your contributions to an Individual Retirement Arrangement (IRA) because the amount you reported was not made in the required time. The contribution may be made up to the due date (without regard to any extension) for filing the tax return.

5702

Excess contributions/excise tax

Since you made a contribution to an Individual Retirement Arrangement (IRA) that exceeds the amount that you may contribute during the tax years, you must pay a 6 percent excise tax on the amount of the excess contributions. You must pay this excise tax each year on the excess amount that remains in your IRA. You will receive a billing separate from the Federal income tax billing.

5703

Premature distribution/IRA

We adjusted your gross income to include the amount you received as a payment from your Individual Retirement Arrangement (IRA). Since you received the payment before you reached age 59 1/2 and it was not received on account of death of the IRA owner, disability, certain medical expenses, certain higher education expenses, a first time home purchase, an IRS levy, certain annuity payments, or as a qualified reservist distribution, your tax is also increased by 10 percent of the premature distribution.

5704

Not established that TP was entitled

We have adjusted your deduction for contributions to your Individual Retirement Arrangement because you have not established that you are entitled to the deduction.

5705

Removed from Sch C/F allowed

The contributions to your Individual Retirement Arrangement are allowed as an adjustment to income but cannot be deducted on Schedule C or F. We adjusted your Schedule C or F expenses accordingly and allowed the contribution as an adjustment to income.

5706

Rollover

Since you did not make your rollover within the required time (60 days) it does not qualify for exclusion. Therefore, we included the rollover in income and refigured your tax accordingly.

5707

Allowed deduction for amount verified as being paid to IRA

You are allowed a deduction for the amount verified as paid to your individual retirement account.

5708

Allowed deduction for amount verified as paid to plan or Keogh

You are allowed a deduction for the amount verified as paid to your qualified retirement plan (including a Keogh plan).

5709

Not eligible for deduction - plan or Keogh not qualified or paid

You are not allowed a deduction for the amount paid to your retirement plan (including Keogh plan) because it was not paid in time or the plan was not a qualified plan.

5710

Contribution limitation

Your deduction for contributions to a qualified retirement plan (including a Keogh plan) has been adjusted because the amount you claimed as a deduction exceeds the applicable limit.

5711

Premature distribution/Keogh

We have adjusted your gross income to include the amount you received from your qualified retirement plan (which includes a Keogh plan). Because you received the payment before you reached age 59 1/2 and none of the exceptions apply (such as disability), your tax is also increased by 10 percent of this premature distribution.

5712

Added tax of 10 percent due to premature distribution-IRA

We adjusted your tax by 10 percent of the premature distribution made from your Individual Retirement Account (IRA). The 10 percent tax is applicable because the distribution was made before you reached age 59 1/2 and it was not on account of death or the IRA owner, disability, certain medical expenses, certain higher education expenses, a first time home purchase, an IRS levy, certain annuity payments, or as a qualified reservist distribution.

5713

Added tax of 10 percent due to premature distribution-Keogh

We adjusted your tax by 10 percent of the premature distribution made from your qualified retirement plan (including a Keogh plan).

5714

Limitation on contribution to IRA

The amount that you may contribute to a qualified Individual Retirement Account is limited to the lesser of $2,000 or your earned income after certain adjustments (including the IRC 911 exclusion).

5715

Canadian IRA

Contributions to a Canadian Registered Retirement Savings Plan do not qualify as deductible Individual Retirement Account contributions.

5716

Deduction limited based on AGI/filing status

If you are covered by an employer retirement plan, your deduction for your contribution to your Individual Retirement Arrangement (IRA) is limited based on your adjusted gross income. Your deduction is reduced or eliminated entirely depending on your filing status and income as follows:

Deduction reduced if; and Deduction eliminated if, and AGI is within phase-out range of; and if AGI is

Single or HOH; $30,000 to $40,000 ------------- $40,000 or more
Married Filing Joint or Qualified Widow(er) ---------- $50,000 to $60,000 ------------ -$60,000 or more
Married Filing Separate --------------- 0 to $10,000 ------------- $10,000 or more

5717

Deduction limited based on AGI/spouse covered by qualified plan

If you are not covered by a qualified retirement plan, but your spouse is, the maximum deduction allowable for your Individual Retirement Arrangement (IRA) must be reduced proportionately if your adjusted gross income is above $150,000 but below $160,000, and you are married and file a joint return. If you file separately, the maximum allowable deduction is $0.

5718

Tax on earnings deferred

Even though you are not eligible to deduct all or part of your contribution to an Individual Retirement Arrangement (IRA), tax on the earnings is deferred until withdrawn.

5719

Required distribution-cannot roll over

If the distribution from your Individual Retirement Arrangement (IRA) was required under the minimum distribution rules (age 70 1/2), this distribution cannot be rolled over to another IRA. We have adjusted your income to include this amount.

5720

Separate returns-lived with spouse

Even though you filed as married filing separately, if you lived with your spouse during the taxable year, the active participant status of both spouses must be considered for purposes of determining the amount, if any, you can deduct as a contribution to your Individual Retirement Account.

5721

Premature distribution/qualified retirement plan

Your gross income has been increased to include the amount you received as payment from your qualified retirement plan. Since you received the payment before you reached age 59 1/2, your tax is also increased by 10 percent of the premature distribution unless an exception applies.

5722

Added tax of 10 percent due to premature distribution

We adjusted your tax by ten percent of the premature distribution made from your qualified retirement plan.

5723

25 percent Tax - SIMPLE IRA

We adjusted your tax by twenty five percent of the premature distribution from your SIMPLE IRA.

5724

10 percent Tax - medical expenses

If you are under age 59 1/2, you do not have to pay the additional 10 percent tax on amounts you withdraw that are not more than: (1) the amount you paid for unreimbursed medical expenses during the year of the withdrawal, minus (2) 7.5 percent of your adjusted gross income for the year of the withdrawal. Since your early distribution exceeds this amount, you are subject to the 10 percent additional tax on the remainder.

5725

10 percent tax-qualified retirement plan

We are proposing to adjust your tax by 10 percent of the premature distribution made from your qualified retirement plan because you received the distribution before you reached age 59 1/2 and the payment didn’t qualify for one of the allowable exceptions:

• Payments made from the Plan after you separate from service if you will be at least age 55 during the year of the payment

• Payments made due to disability

• Payments made in substantially equal amounts over your life or life expectancy (or the life or life expectancy of you and your beneficiary)

• Payments after the death of the participant

• Payments of Employee Stock Ownership Plan (ESOP) dividends

• Payments paid directly to the government to satisfy a federal tax levy

• Payments made pursuant to a Qualified Domestic Relations Order, (QDRO)

• Payments in excess of the amount of your deductible medical expenses

• Payments while you are on active duty if you were called to duty after September 11, 2001, for more than 179 days

• Payments from a governmental defined benefit pension plan to a public safety employee who is at least age 50

• Payments made to correct certain excess contributions or deferrals

• Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution.

If you believe you qualify for one of the exceptions, please provide us with documentation that shows you meet one of the above exceptions. Examples of acceptable documents include: corrected Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., from the issuing entity,
or statement from your plan administrator, explaining why you meet the exception,
or statement from your medical practitioner explaining your disability,
or copies of cancelled checks or receipts showing when and what qualified expenses were made,
or a copy of the QDRO (generally part of your divorce decree).

5726

10 percent tax-IRA

We are proposing to adjust your tax by 10 percent of the premature distribution made from your Individual Retirement Account (IRA) because you received the distribution before you reached age 59 1/2 and the payment didn’t qualify for one of the allowable exceptions:

• Payments made due to disability

• Payments made in substantially equal amounts over your life or life expectancy (or the life or life expectancy of you and your beneficiary)

• Payments after the death of the IRA owner

• Payments for qualified higher education expenses

• Payments to buy, build, or rebuild a first home

• Payments paid directly to the government to satisfy a federal tax levy

• Payments in excess of the amount of your deductible medical expenses

• Payments to unemployed individuals for health insurance premiums

• Payments while you are on active duty if you were called to duty after September 11, 2001, for more than 179 days

If you believe you qualify for one of the exceptions, please provide us with documentation that shows you meet one of the above exceptions. Examples of acceptable documents include:

• corrected Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., from the issuing entity

• a statement from your plan administrator explaining why you meet the exception

• a statement from your medical practitioner explaining your disability or

• copies of cancelled checks or receipts showing when and what qualifying expenses were made

5727

10 percent tax-annuity contract

We are proposing to adjust your tax by 10 percent of the premature distribution made from your annuity contract because you received a distribution before you reached age 59 1/2 and the payment didn’t qualify for one of the allowable exceptions:

• Payments after the death of the annuity owner

• Payment made due to disability

• Payments made in substantially equal amounts over your life or life expectancy (or the life or life expectancy of your beneficiary)

• Payments allocable to an investment in the contract before August 14, 1982

• Payments made under a qualified personal injury settlement

• Payments from a qualified retirement plan

• Payments made under an immediate annuity contract or

• Payments made under a deferred annuity contract purchased by your employer upon termination of a qualified plan that is held by your employer until you separate from service.

• Payments while you are on active duty if you were called to duty after September 11, 2001, for more than 179 days

If you believe you qualify for one of the exceptions, please provide us with documentation that shows you meet one of the above exceptions. Acceptable documents include:

• corrected Form 1099–R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., from the issuing entity

• a statement from your annuity holder explaining why you meet the exception, or

• a statement from your medical practitioner explaining your disability.

5728

25 percent tax-SIMPLE IRA

We adjusted your tax by 25 percent of the premature distribution made from your SIMPLE Individual Retirement Account (IRA) because you received the distribution within 2 years of the date you began as a participant in the SIMPLE IRA, and did not rollover the amount of the distribution received into another SIMPLE IRA.

Please provide us with a corrected Form 1099–R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., or statement from your plan administrator that you rolled over the amount of the distribution received into another SIMPLE IRA, or
That you meet one of the exceptions to the additional tax on premature distributions.

5729

IRA deduction

Your filing status affects your allowable IRA deduction. Since we changed your filing status to married filing separately, we disallowed all or part of your deduction.

5730

Contribution limited based on fillable-AGI for filing status

If you are covered by an employer retirement plan, your deduction for your contribution to your Individual Retirement Arrangement (IRA) is limited based on your adjusted gross income. Your deduction is reduced or eliminated entirely depending on your filing status and income as follows: (1) Filing Status is; (2) Deduction reduced if AGI is within phase-out range of; or (3) Deduction eliminated if AGI is:

(1) Single or HOH; (2) $________ to $________; or (3) $________ or more.
(1) Married Filing Joint or Qualified Widow(er); (2) $________ to $________; or (3) $________ or more.
(1) Married Filing Separate; (2) $________ to $________; or (3) $________ or more.

5731

Limitation on contribution to IRA ($5,000 limit in effect for 2010)

The amount that you may contribute to a qualified Individual Retirement Account is limited to the lesser of $5,000 ($6,000 if you are age 50 or older) and your earned income after certain adjustments (including the IRC 911 exclusion).

5732

Deduction limited based on AGI/filing status (for 2010)

If you are covered by an employer retirement plan, your deduction for your contribution to your Individual Retirement Arrangement (IRA) is limited based on your adjusted gross income. Your deduction is reduced or eliminated entirely depending on your filing status and income as follows:

Deduction reduced if; and Deduction eliminated if, and AGI is within phase-out range of; and if AGI is

Single or HOH; $56,000 to $66,000 ------------- $66,000 or more
Married Filing Joint or Qualified Widow(er) ---------- $89,000 to $109,000 ------------ -$109,000 or more
Married Filing Separate --------------- 0 to $10,000 ------------- $10,000 or more

5733

Deduction limited based on AGI/spouse covered by qualified plan (for 2010)

If you are married and file a joint return and you are not covered by a qualified retirement plan, but your spouse is, the maximum allowable deduction for your contribution to an Individual retirement Arrangement (IRA) must be reduced proportionately if your adjusted gross income is between $166,000 and $176, 000 and no deduction is available if your adjusted gross income is $176,000 or more. If you file separately, the maximum allowable deduction is reduced if your income is between $0 and $10,000 and no deduction is available if your adjusted gross income is $10,000 or more.

5734

Deduction limited based on AGI/ filing status (for 2010)

If you are covered by an employer retirement plan, your deduction for your contribution to your Individual Retirement Arrangement (IRA) is limited based on your adjusted gross income. Your deduction is reduced or eliminated entirely depending on your filing status and income as follows:

Deduction reduced if; and Deduction eliminated if, and AGI is within phase-out range of; and if AGI is

Single or HOH; $55,000 to $65,000 or more
Married Filing Joint or Qualified Widow(er) ---------- $89,000 to $109,000 ------------- $109,000 or more
Married Filing Separate $0 to $10,000 ------------- $10,000 or more

5735

Excess deferrals to 401(k) plans (2017)

Internal Revenue Code 402(g) limits the amount of elective deferrals a participant may exclude from taxable income. For 2017, that limit was $18,000 ($24,000 if age 50 or older). Excess deferrals are (1) included in a participant’s taxable income for the year contributed and (2) taxed a second time when the deferral is ultimately distributed from the plan. We have increased your taxable income to include the excess deferral amount and adjusted your tax accordingly.

5801

Feed deposit

Your deduction for prepaid feed is disallowed because the expenditure did not pay for the purchase of feed but instead was a deposit.

5802

Prepaid feed - personal - not valid business purpose

Your deduction for prepaid feed is disallowed because the prepayment was not made for a valid business purpose.

5803

Prepaid feed - material distortion of income

Your deduction for prepaid feed is disallowed because allowing this deduction in the year of payment results in a material distortion of your income.

5804

Activity not for profit/profit motive

If you raise crops or livestock mainly for the use of your family, but derive some income from incidental sales, you will not be considered as operating a farm for profit; therefore, you may not deduct expenses of carrying on the business of farming.

5805

Contested liability-not paid

Under the cash basis method of accounting, a contested liability may be deducted only in the year the liability is paid. Since you did not pay the liability in the current year, your deduction is denied.

5806

Accrual basis-must maintain an inventory

You must use an accrual method to compute purchases and sales because you are required to use an inventory method. We refigured your cost of sales and your income accordingly.

5807

Accounting method changed without permission

You may not change from the unit-livestock-price method to the cost or market method without permission from the Internal Revenue Service.

5808

Prepayments material distortion of income-computation method

Because prepayments of management fees, interest, or loan expenses materially distort income, we made the adjustment shown in the attached computation.

5809

Farm syndicate-prepaid feed-allow when consumed

For a farm syndicate, a deduction for amounts paid for feed, seed, fertilizer, or similar farm supplies is allowed only for the tax year in which those items are actually used or consumed.

5810

Farm corporation - must use accrual method

Your farming corporation must use the accrual method of accounting.

5811

Preproduction period-capitalize

Any amount attributable to crops, animals, or property having a crop or yield during the preproductive period of the property must be capitalized in accordance with IRC 447.

5812

Hobby

For a farm loss to be allowable, you must show you intended to make a profit from your farming operations. This intent must be supported by actions that show you entered into and operated your farming business for the purpose of making a profit. Since your operations do not indicate you satisfied this requirement, no loss is allowable.

5813

Conservation expenses

Conservation expenses are limited to 25 percent of gross income from farming.

5814

Land clearing expenses limitation

Land clearing expenses that are conservation expenses are limited to 25 percent of gross income from farming.

5815

Land clearing

Land clearing expenses in preparation for farming are not deductible.

5816

Prepaid farming expenses

To the extent that prepaid farming expenses exceed 50 percent of total nonprepaid farming expenses, amounts paid for feed, seed, and similar farm supplies may be deducted only as the supplies are actually used.

5817

Expenses allowed

The expenses examined in connection with your farming activity have been allowed as verified.

5818

Nondeductible personal expense disallowed

Since the deductions you claimed in connection with your farming activity were nondeductible personal expenses, they have been disallowed.

5819

Discharges after April 9, 1986

The taxable income generated by the discharge of "qualified farm indebtedness" by a "qualified person" may be excluded from income and used as a reduction for specific items. See the attached computation.

5820

Patronage dividends

Patronage dividends in the amount shown have been added to your income from farming on Schedule F.

5821

Commodity credit corporation loan income

Since you elected to treat as income the amount of your previous loan from the Commodity Credit Corporation, you must include in gross income, loans received in subsequent taxable years. Therefore, your income has been increased to include the loan amounts received for this taxable year.

5822

Cost must be capitalized per IRC 263A

These costs must be capitalized in accordance with IRC 263A.

5823

Cost must be included in inventory per IRC 263A

These costs must be included in inventory costs in accordance with IRC 263A.

5901

Defense of title - legal fees of

Legal expenses incurred for defense of title to property are not deductible.

5902

Divorce-legal fees of

Legal expenses incurred for the purpose of getting a divorce are personal, nondeductible expenses.

5903

Lobbying expense

Legal expenses in connection with the following lobbying and political activities are not deductible:

1. influencing legislation (other than certain local legislation),

2. participating or intervening in a campaign for public office,

3. influencing the general public concerning election, legislative matters, or referendums, or

4. directly communicating with a covered executive branch official to influence that person's official actions.

5904

Purchase personal residence-legal fees of

Legal expenses incurred in connection with the purchase and sale of a personal residence are not deductible.

5905

Tax exempt income - legal fees of

Legal expenses allocable to tax-exempt income are nondeductible.

5906

Will preparation fees

Legal expenses incurred in the preparation of a will are not deductible.

5907

Personal legal fees

The legal expenses you reported are not deductible because they are personal.

5908

Legal expenses not deductible/purchase of property used in business

Legal expenses are not deductible when they are for the purchase of property held for the production of income or used in a trade or business. These costs are capitalized by adding them to your basis in the asset.

5909

Legal expenses allowed

You are allowed an additional deduction for legal expenses.

6001

Depletion-cost-general

Under the cost method of depletion, each unit of production sold is assigned a part of the cost or other basis of the interest. This is determined by dividing the cost or other basis by the total units expected to be recovered. We refigured your depletion accordingly.

6002

Depletion- percent depletion-general

Under the percentage or statutory method of figuring depletion, the law provides a special percentage factor for different types of minerals and other natural resources. This percentage is multiplied by the gross income from the interest to arrive at the depletion allowance. We refigured your depletion allowance accordingly.

6003

Depletion - percent depletion-oil and gas limitations

Under the percentage depletion method a flat percentage of the gross income from the property is taken as the depletion deduction. For oil and gas wells, the deduction allowed by the IRC 613A is the lesser of

1. the flat percentage of gross income from the property

2. 100 percent of the Taxable Income from the property, or

3. 65 percent of the taxable income on the entire tax return.

We have recomputed your depletion allowance as shown in the attached computation.

6004

Depletion - percent depletion oil and gas limit allowed only on oil prod.

The law allows percentage depletion only on oil and gas actually produced and sold under the taxpayer's normal method of accounting or only on income from oil actually produced.

6005

Depletion prohibited to a purchaser w/ certain exception

Oil and gas properties transferred after 1974 and before October 11, 1990 are not eligible for percentage depletion except for transfers made by death, some code section 351 exchanges, and other nontaxable transfers.

6007

Depletion - percent depletion limitation

The law provides for percentage depletion for independent producers and royalty owners to be limited to 65 percent of taxable income (reduced in the case of an individual by the zero bracket amount), with certain adjustments.

6008

Depletion- percent depletion-deductible only in year advance received

Advance payments for oil and gas are includible in income in the year received and percentage depletion is allowable only on oil and gas produced in the same year. We adjusted your depletion allowance accordingly.

6009

Intangible drilling costs

Since you hold neither a working or an operating interest in any track or parcel of land, either as a fee owner or under a lease or contract granting operating rights, you may not charge intangible drilling and development of oil and gas properties to expense.

6010

Timber

Special rules apply to recognition of gain from the sale of timber. A taxpayer may elect to treat the cutting of timber, which is held for sale or use in a trade or business, as a sale or exchange. If the holding period requirements are met, the gain is recognized as IRC 1231 gain and may, therefore, receive capital gain treatment.

6011

Depletion- percent depletion-not allowed expenses pay w/o regard to prod.

Percentage depletion is not allowable for lease bonuses, advance royalty payments, or other amounts, payable without regard to actual production from an oil, gas, or geothermal property.

6101

Adjusted as shown

We have adjusted your net operating loss as shown in the accompanying computations.

6102

Non-business loss-disallowed

You did not sustain a net operating loss in the tax year within the meaning of IRC 172 because your loss was attributable solely to non-business expenses. Therefore, there is no net operating loss carryback or carryover, and your deduction claimed is disallowed. Taxable income is increased accordingly.

6103

Period for carryback/carryover

In general, for tax years beginning after August 5, 1997, the period to which you can carry a net operating loss (NOL) back is 2 tax years. The period to which you can carry an NOL forward is 20 years. Since you have not established that you qualify for an extended carryback period, we refigured your deduction accordingly.

6104

Carryback/carryover

Since you did not elect to forego the carryback period on a loss year return filed on time; or, provided you filed your loss year return timely, on an amended loss year return filed within 6 months of the due date (excluding extensions) of the loss year return, you cannot deduct the amount eligible for carryback in a later year.

6105

Carry-over period expired

We disallowed your net operating loss deduction because the carry-over period expired.

6106

Remove a carryback/carryover from computation of current year loss

In computing this year's net operating loss, you must remove a net operating loss carryback or carryover from another year. Accordingly, we refigured your net operating loss.

6107

Capital losses/gains

Capital losses that are more than capital gains cannot be taken into account in the net operating loss computation. Accordingly, we refigured your net operating loss.

6108

Exemptions

You cannot take your personal and dependency exemptions into account in your net operating loss computation. Accordingly, we modified your net operating loss.

6109

Interest income

Interest income is considered non-business income even though this is the principal source of income. We refigured your net operating loss accordingly.

6110

Dividend income/income averaging

Dividend income is considered non-business income even though this is the principal source of income. We refigured your net operating loss accordingly.

6111

Salary

Your salary from outside employment must be used to reduce the loss from your business and cannot be offset by non-business deductions. We refigured your net operating loss accordingly.

6112

Loss in more than 1 year

Since you sustained a net operating loss in more than one year, the loss occurring in the earlier year must be deducted from the income of other years before the later loss. Although the net operating loss deduction is the total of all carrybacks and carryovers to the year, the earlier loss must be used first. We refigured your net operating loss deduction accordingly.

6113

Zero bracket amount/standard deduction

In figuring a Net Operating Loss (NOL), the standard deduction is treated as a non-business deduction that can be used to offset non-business income. We refigured your net operating loss accordingly.

6114

Nonbusiness items

You can deduct non-business items such as taxes on a personal residence or medical expenses only to the extent of non-business gross income and the amount by which non-business capital gains are more than non-business capital losses. You cannot include the excess in a net operating loss. Therefore, we refigured your net operating loss.

6115

Retirement plans

Contributions to a retirement plan on behalf of a self-employed owner-employee, to the extent deductible, are considered non-business deductions. We refigured your net operating loss accordingly.

6116

Investment tax credit

Since your investment tax credit is limited to your tax for the year, the carryback of your net operating loss reduces the investment credit allowed. The recomputed credit is subject to the provisions of IRC 38(c) and IRC 39(c).

6117

Nonbusiness capital gains/capital losses

The amount by which non-business capital losses are more than non-business capital gains cannot be included in the net operating loss deduction.

6118

Excess business capital losses over business capital gains

The amount by which business capital losses are more than business capital gains can be included in the net operating loss deduction only if certain conditions are met.
(1) There is a net non-business capital gain; and
(2) That non-business capital gain is more than the excess of non-business ordinary deductions over non-business ordinary income.

The net business capital loss is limited to the amount by which the net non-business capital gain exceeds the excess non-business deductions.

6119

Taxable Income for carryback year is greater than NOL

Since the taxable income for the carryback year is greater than the net operating loss, it fully absorbs the loss and no modifications are required. However, the deductions limited by adjusted gross income are affected (except for contributions).

6120

Charitable contribution

Although the deduction for charitable contributions has a ceiling based on adjusted gross income, the allowable deduction is determined without regard to any net operating loss carrybacks.

6121

Minimum tax

We refigured your minimum tax because of changes in net operating loss carryover.

6122

Election to forego carryback is irrevocable

Your election to forego the carryback period is irrevocable and specifies that you are relinquishing the entire carryback period. You lose any part of the net operating loss that you do not absorb by the end of the carryover period. Therefore, we refigured your net operating loss.

6123

Adjusted gross income limitation

Because your adjusted gross income was reduced, your medical expense deduction increased.

6124

Carryover/carryback year adjusted due to change in loss year

Since the net operating loss on which this carryback/carryover is based was disallowed or decreased, the carryback/carryover was disallowed in the amount shown.

6125

Election to apply an extended carryback period to an applicable net operating loss

Your election to apply an extended carryback period to an applicable net operating loss is irrevocable and specifies that you will carry the applicable net operating loss to the earliest carryback year first. Therefore, we have refigured your net operating loss deduction.

6126

Period for carryback

We disallowed your net operating loss carryback. In general, for tax years beginning after December 31, 2017, net operating losses cannot be carried back but can be carried forward indefinitely.

6127

Computation of net operating losses

Net operating loss deductions and net operating loss carryovers for losses arising in tax years beginning after December 31, 2017, are limited to 80 percent of your taxable income. We adjusted your allowable net operating loss deduction as shown in the attached computation.

6201

Adoption credit adjusted

We have adjusted your adoption credit to the amount verified.

6202

Expenses do not qualify as adoption expenses

Because the expenses you verified are expenses that do not qualify as adoption expenses, your credit has been disallowed.

6203

Credit disallowed/paid or reimbursed by employer

The credit is available only for expenses that have not been reimbursed. Because the adoption expenses you claimed were paid or reimbursed by your employer, we disallowed your credit.

6204

Modified AGI adjusted/adoption credit adjusted

The income limit on the adoption credit or exclusion is based on your modified adjusted income (MAGI). Since we adjusted your MAGI, your credit has been adjusted accordingly.

6205

Adoption not final/not U.S. citizen or resident/credit disallowed

Because the child claimed for Adoption Credit was not a U.S. citizen or resident and the adoption did not become final during the year, you cannot take the adoption credit.

6206

Adoption not final/not a U.S. citizen or resident/ excl disallowed

Because the child claimed for Adoption Credit was not a U.S. citizen or resident and the adoption did not become final during the year, you cannot take the adoption exclusion.

6207

Separate return requirements/credit or exclusion disallowed

You can take a credit or exclusion on a separate return if you are legally separated under a decree of divorce or separate maintenance agreement, or if you lived apart from your spouse for the last six months of the tax year and:

1. your home is the eligible child's home for more than half the year, and

2. you paid more than half the cost of keeping up your home for the year.

Since you have not met these requirements, your credit or exclusion has been disallowed.

6208

Special needs/credit disallowed

Since you have not established that the child claimed for Adoption Credit qualifies as a special needs child, your credit has been disallowed.

6209

Adoption credit disallowed/computation attached

We have disallowed your Adoption Credit. See the attached computation.

6210

Foreign child/not special needs/credit adjusted

A foreign child cannot be treated as a child with special needs. We have adjusted your credit as shown in the attached computation.

6211

Credit disallowed/qualifying children disallowed

Since one or more of the children listed in claiming the adoption credit is not an eligible child, the amount of the adoption credit has been adjusted as shown.

6301

Disallowed credit derived from non-conventional sources

We disallowed the income tax credit you claimed for the domestic production of oil, gas, or synthetic fuels derived from non-conventional sources.

6302

Adjusted credit derived from non-conventional sources

We adjusted the income tax credit you claimed for the domestic production on oil, gas, or synthetic fuels derived from non-conventional sources.

6303

Qualified state tuition program

Your distributions from a qualified state tuition program are taxable only to the extent they are more than the amount contributed to the program. Therefore, an adjustment has been made to your taxable income.

6304

DC first time home buyers credit adjusted

We have adjusted your District of Columbia First Time Home Buyers Credit as shown in the attached computation.

6306

Mortgage interest credit-allowed

You have been allowed a mortgage credit for a portion of the interest paid on your home mortgage.

6307

Mortgage interest credit computation

We have computed your mortgage credit as shown in the attached computation.

6308

Mortgage interest credit limitation

Since your mortgage credit rate exceeds 20 percent, your credit is limited to $2,000.

6309

Mortgage interest excess/carry forward three years

Since you could not credit the full amount of interest paid or accrued as a mortgage credit, the excess credit can be carried forward three years.

6310

Rate reduction credit

Since we have adjusted your tax, we have recomputed the amount of your rate reduction credit.

6311

Rate reduction credit - filing status

Since we have adjusted your taxable income, tax and/or your filing status, we have recomputed the amount of your rate reduction credit.

6312

Making Work Pay Tax credit

Since we have adjusted your earned income, we have adjusted your Making Work Pay Credit accordingly.

6313

First time home buyer credit

Our records indicate that you may not meet the requirement for the First Time Home buyer credit therefore we have disallowed the credit. Please see the attached Form 886-H-FTHBC, Supporting Documents to Prove First Time Homebuyer Credit, which explains the documents you will need to provide to support your eligibility for this credit.

6314

Recovery rebate credit

Since one or more of the qualifying children claimed on your tax return have been disallowed, the amount of Recovery Rebate Credit (RRC) claimed on your tax return has been adjusted as shown.

6315

Recovery rebate credit (tax year 2021)

Since one or more of the qualifying children or dependent(s) claimed on your tax return have been disallowed, the amount of Recovery Rebate Credit (RRC) claimed on your tax return has been adjusted as shown.

6316

Sick and family leave credit - Sch C disallowed

Because we determined that the activity described on your Schedule C does not meet the guidelines of carrying on a trade or business within the meaning of IRC 1402, we have disallowed your Schedule C gross income and/or expenses. Therefore, the Sick and Family Leave credit has been adjusted as shown.

6317

Sick and family leave credit – Sch C adjusted

Because we have adjusted your Schedule C gross income and/or expenses that were used for purposes of claiming the Sick and Family leave credit, the Sick and Family Leave credit has been adjusted as shown.

6318

IRC 1341 (claim of right) disallowed

If you repaid an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income in the year in which you repaid it, or the tax attributable to said income may be claimed as a credit. Certain criteria must be met to claim as a credit. Since you did not verify that you are eligible to claim the Claim of Right credit, we have disallowed it.

6319

IRC 1341 (claim of right) adjusted

If you repaid an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income in the year in which you repaid it, or the tax attributable to said income may be claimed as a credit. Since you did not calculate your Claim of Right credit correctly, we have adjusted it as shown in the attached report.

6320

Sick and family leave credit - no indication of a business activity

Because we determined the income shown on your Form 1040 is not self-employment income from carrying on a trade or business within the meaning of IRC 1402, the Sick and Family Leave credit has been adjusted as shown.

6321

Residential Energy Credit(s)

We have adjusted your Residential Energy Credit(s) as shown in the attached computation.

6401

Disallowed general business credit

We disallowed the General Business Credit claimed on your return.

6402

Alcohol fuels credit/adjusted

We have adjusted the Alcohol Fuels Credit (Form 6478) as shown in the attached computation.

6403

Alcohol fuels credit/additional

We have allowed an additional Alcohol Fuels Credit, as shown in the attached computation.

6404

Credit for contribution to selected community development corp/ adjusted

We have adjusted your Credit for Contribution to Selected Community Development Corporations (Form 8847), as shown in the attached computation.

6405

Credit for contribution to selected community development corp/ additional

We have allowed you an additional Credit for Contributions to Selected Community Development Corporations, as shown in the attached computation.

6406

Credit for taxes paid on certain employee tips/adjusted

We have adjusted your credit for taxes paid on certain employee tips (Form 8846), as shown in the attached computation.

6407

Credit for taxes paid on certain employee tips/additional

We have allowed you an additional credit for taxes paid on certain employee tips, as shown in the attached computation.

6408

Disabled access credit/adjusted

We have adjusted your Disabled Access Credit (Form 8826), as shown in the attached computation.

6409

Disabled access credit/additional

We have allowed an additional Disabled Access Credit, as shown in the attached computation.

6410

Empowerment zone employment credit/adjusted