Publication 17
Your Federal Income Tax

For Individuals

For use in preparing 2002 Returns

Aliens

Your status as an alien - resident, nonresident, or dual-status - determines whether and how you must file an income tax return.

The rules used to determine your alien status are discussed in Publication 519, U.S. Tax Guide for Aliens.

Resident alien.   If you are a resident alien for the entire year, you must file a tax return following the same rules that apply to U.S. citizens. Use the forms discussed in this publication.

Nonresident alien.   If you are a nonresident alien, the rules and tax forms that apply to you are different from those that apply to U.S. citizens and resident aliens. See Publication 519 to find out if U.S. income tax laws apply to you and which forms you should file.

Dual-status taxpayer.   If you were a resident alien for part of the tax year and a nonresident alien for the rest of the year, you are a dual-status taxpayer. Different rules apply for each part of the year. For information on dual-status taxpayers, see Publication 519.

Who Should File

Even if you do not have to file, you should file a federal income tax return to get money back if any of the following conditions apply.

1. You had income tax withheld from your pay.
2. You qualify for the earned income credit. See chapter 37 for more information.
3. You qualify for the additional child tax credit. See chapter 35 for more information.

Which Form
Should I Use?

You must use one of three forms to file your return: Form 1040EZ, Form 1040A, or Form 1040. (But also see Does My Return Have To Be On Paper, later.)

Form 1040EZ

Form 1040EZ is the simplest form to use.

You can use Form 1040EZ if all of the following apply.  

1. Your filing status is single or married filing jointly. If you were a nonresident alien at any time in 2002, your filing status must be married filing jointly.
2. You (and your spouse if married filing a joint return) were under age 65 and not blind at the end of 2002. If you were born on January 1, 1938, you are considered to be age 65 at the end of 2002.
3. You do not claim any dependents.
4. Your taxable income is less than $50,000.
5. Your income is only from wages, salaries, tips, unemployment compensation, Alaska Permanent Fund dividends, taxable scholarship and fellowship grants, and taxable interest of $1,500 or less.
6. You did not receive any advance earned income credit (EIC) payments.
7. You do not claim any adjustments to income, such as a deduction for IRA contributions or student loan interest.
8. You do not claim any credits other than the earned income credit.

You must meet all of these requirements to use Form 1040EZ. If you do not, you must use Form 1040A or Form 1040.

Table 1-3. Other Situations When You Must File a 2002 Return

Figuring tax.   On Form 1040EZ, you can only use the tax table to figure your tax. You cannot use Form 1040EZ to report any other tax.

Form 1040A

If you do not qualify to use Form 1040EZ, you may be able to use Form 1040A.

You can use Form 1040A if all of the following apply.  

1. Your income is only from wages, salaries, tips, IRA distributions, pensions and annuities, taxable social security and railroad retirement benefits, taxable scholarship and fellowship grants, interest, ordinary dividends (including Alaska Permanent Fund dividends), capital gain distributions, and unemployment compensation.
2. Your taxable income is less than $50,000.
3. Your adjustments to income are for only the following items.
   1. Educator expenses.
   2. IRA deduction.
   3. Student loan interest deduction.
   4. Tuition and fees deduction.
4. You do not itemize your deductions.
5. Your taxes are from only the following items.
   1. Tax Table.
   2. Alternative minimum tax. (See chapter 31.)
   3. Advance earned income credit (EIC) payments, if you received any. (See chapter 37.)
   4. Recapture of an education credit.
   5. Form 8615, Tax for Children Under Age 14 Who Have Investment Income of More Than $1,500.
   6. Capital Gain Tax Worksheet.
6. You claim only the following credits.
   1. The credit for child and dependent care expenses. (See chapter 33.)
   2. The credit for the elderly or the disabled. (See chapter 34.)
   3. The child tax credit. (See chapter 35.)
   4. The additional child tax credit. (See chapter 35.)
   5. The education credits. (See chapter 36.)
   6. The retirement savings contributions credit. (See chapter 38.)
   7. The earned income credit. (See chapter 37.)
   8. The adoption credit. (See chapter 38.)

You must meet all of the above requirements to use Form 1040A. If you do not, you must use Form 1040.

If you meet the above requirements, you can use Form 1040A even if you received employer-provided adoption benefits or dependent care benefits.

If you receive a capital gain distribution that includes 28% rate gain, qualified 5-year gain, unrecaptured section 1250 gain, or section 1202 gain, you cannot use Form 1040A. You must use Form 1040.

Form 1040

If you cannot use Form 1040EZ or Form 1040A, you must use Form 1040. You can use Form 1040 to report all types of income, deductions, and credits.

You may have received Form 1040A or Form 1040EZ in the mail because of the return you filed last year. If your situation has changed this year, it may be to your advantage to file Form 1040 instead. You may pay less tax by filing Form 1040 because you can take itemized deductions and some adjustments to income and credits you cannot take on Form 1040A or Form 1040EZ.

You must use Form 1040 if any of the following apply.  

1. Your taxable income is $50,000 or more.
2. You itemize your deductions.
3. You received or paid interest on securities transferred between interest payment dates.
4. You received nontaxable distributions required to be reported as capital gains.
5. You received capital gain distributions that included 28% rate gain, qualified 5-year gain, unrecaptured section 1250 gain, or section 1202 gain.
6. You have to complete Part III of Schedule B (Form 1040) because:
   1. You received a distribution from a foreign trust, or
   2. You had a bank, securities, or other financial account in a foreign country at any time during the year.

      Note. If the combined value of the foreign account(s) was $10,000 or less during all of 2002, or if the account(s) was with a U.S. military banking facility operated by a U.S. financial institution, you may be able to use Form 1040A or Form 1040EZ.

7. You had income that cannot be reported on Form 1040EZ or Form 1040A. This includes gain from the sale of property, barter income, alimony income, taxable refunds of state and local income taxes, self-employment income (including farm income), qualified tuition program earnings, Coverdell ESA distributions, and income received as a partner in a partnership, a shareholder in an S corporation, or a beneficiary of an estate or trust.
8. You are reporting original issue discount in an amount more or less than the amount shown on Form 1099-OID.
9. You sold or exchanged capital assets or business property.
10. You claim any adjustments to gross income other than the adjustments listed earlier under Form 1040A.
11. Your Form W-2 shows uncollected employee tax (social security and Medicare tax) on tips or group-term life insurance in box 12. (See chapter 7.)
12. You received $20 or more in tips in any one month and did not report all of them to your employer. (See chapter 7.)
13. You must pay tax on self-employment income. (See Schedule SE (Form 1040), Self-Employment Tax.)
14. You must pay household employment taxes. (See Schedule H (Form 1040).)
15. You have to recapture an investment credit, a low-income housing credit, a qualified electric vehicle credit, or an Indian employment credit.
16. You have to recapture tax on the disposition of a home purchased with a federally-subsidized mortgage. (See chapter 16.)
17. You have to pay tax on an excess golden parachute payment.
18. You claim any credits other than the credits listed earlier under Form 1040A.
19. You have to file other forms with your return to report certain exclusions, taxes, or transactions. This includes the following forms.
    1. Form 2555, Foreign Earned Income.
    2. Form 2555-EZ, Foreign Earned Income Exclusion.
    3. Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa.
    4. Form 4970, Tax on Accumulation Distribution of Trusts.
    5. Form 4972, Tax on Lump-Sum Distributions. (See chapter 11.)
    6. Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.

       Note. Do not file Form 1040 only because you have to file Form 5329. File Form 5329 by itself. (See chapters 11 and 18.)

    7. Form 8271, Investor Reporting of Tax Shelter Registration Number.
    8. Form 8814, Parents' Election To Report Child's Interest and Dividends.
    9. Form 8853, Archer MSAs and Long-Term Care Insurance Contracts.

Does My Return Have
To Be On Paper?

IRS e-file (electronic filing) is the preferred method of filing. It's so easy, 47 million people use it. You may be able to file a paperless return. This section explains IRS e-file:

• Using an Authorized IRS e-file Provider,
• Using your personal computer, or
• Using a telephone (TeleFile).

IRS e-file

E-file logo

Table 1-4 lists the benefits of IRS e-file. IRS e-file uses automation to replace most of the manual steps needed to process paper returns. As a result, the processing of e-file returns is faster and more accurate than the processing of paper returns. As with a paper return, you are responsible for making sure your return contains accurate information and is filed on time.

Using e-file does not affect your chances of an IRS examination of your return.

Electronic signatures.   Paperless filing is easier than you think and it's available to most taxpayers who file electronically - including those first-time filers who were 16 or older at the end of 2002. If you file electronically using tax preparation software or a tax professional, you may be able to participate in the Self-Select PIN (personal identification number) program. If you are married filing jointly, you and your spouse will each need to create a PIN and enter these PINs as your electronic signatures.

To create a PIN, you must know your adjusted gross income (AGI) from your originally filed 2001 income tax return (not from an amended return, Form 1040X, or any math error notice from the IRS). You will also need to provide your date of birth (DOB). Make sure your DOB is accurate and matches the information on record with the Social Security Administration before you e-file. To do this, check your annual Social Security Statement.

If you use a Self-Select PIN, there's nothing to sign and nothing to mail - not even your Forms W-2. For more details on the Self-Select PIN program, visit the IRS Web Site at www.irs.gov.

Forms 8453 and 8453-OL.   Your return is not complete without your signature. If you are not eligible or choose not to sign your return electronically, you must complete, sign, and file Form 8453, U.S. Individual Income Tax Declaration for an e-file Return, or Form 8453-OL, U.S. Individual Income Tax Declaration for an IRS e-file On-Line Return, whichever applies.

State returns.   In most states, you can file an electronic state return simultaneously with your federal return. For more information, check with your local IRS office, state tax agency, tax professional, or the IRS web site at www.irs.gov.

Refunds.   You can have a refund check mailed to you, or you can have your refund deposited directly to your checking or savings account.

With e-file, your refund will be issued in half the time as when filing on paper. Most refunds are issued within 3 weeks. If you choose Direct Deposit, you can receive your refund in as few as 10 days.

Offset against debts.   As with a paper return, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. See Offset Against Debts under Refunds, later.

Refund inquiries.   If you do not receive your refund within 3 weeks after your return was accepted by IRS, see Past-Due Refund later.

Balance due.   If you owe tax, you must pay it by April 15, 2003, to avoid late-payment penalties and interest. You can make your payment electronically by scheduling an electronic funds withdrawal from your checking or savings account or by credit card.

See How To Pay, later, for information on how to pay the balance due.

Using an Authorized IRS e-file Provider

Many tax professionals can electronically file paperless returns for their clients. You have two options.

1. You can prepare your return, take it to an authorized IRS e-file provider, and have the provider transmit it electronically to the IRS.

2. You can have an authorized IRS e-file provider prepare your return and transmit it for you electronically.

You will be asked to complete Form 8879 to authorize the provider to enter your self-selected PIN on your return.

Depending on the provider and the specific services requested, a fee may be charged. To find an authorized IRS e-file provider near you, go to www.irs.gov or look for an Authorized IRS e-file Provider sign.

Using Your Personal Computer

A computer with a modem or Internet access is all you need to file your tax return using IRS e-file. Best of all, when you use your personal computer, you can e-file your return from the comfort of your home any time of the day or night. Sign your return electronically using a self-selected PIN to complete the process. There is no signature form to submit or Forms W-2 to send in.

New-free Internet filing options.   More taxpayers can now prepare and e-file their individual income tax returns free using commercial tax preparation software-accessible through www.irs.gov or www.firstgov.gov. The IRS is partnering with the tax software industry to offer free preparation and filing services to a significant number of taxpayers. Security and privacy certificate programs will assure tax data is safe and secure. To see if you qualify for these services, visit the Free Internet Filing Homepage at www.irs.gov.

If you cannot use the free services, you can buy tax preparation software at various electronics stores or computer and office supply stores. You can also download software from the Internet or prepare and file your return completely on-line by using a tax preparation software package available on the Internet.

Using a Telephone (TeleFile)

For millions of eligible taxpayers, TeleFile is the easiest way to file. TeleFile allows you to file your simple Federal tax return using a touch-tone telephone. Only taxpayers who met the qualifications for Form 1040EZ in the prior year are eligible to receive the TeleFile tax package for the current year. A TeleFile tax package is automatically mailed to you if you are eligible. TeleFile is completely paperless-there are no forms to mail in. Just follow the instructions in the TeleFile tax package. TeleFile is filed directly with the IRS, usually in 10 minutes, and it's FREE.

Parents: If your children receive a TeleFile tax package, please encourage them to use TeleFile.

Through Employers and Financial Institutions

Some businesses offer free e-file to their employees, members, or customers. Others offer it for a fee. Ask your employer or financial institution if they offer IRS e-file as an employee, member, or customer benefit.

Free Help With Your Return

Free help in preparing your return is available nationwide from IRS-trained volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 or older with their tax returns. Some locations offer free electronic filing.

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