Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

1040x H&r Block

1040ez Instructions 2010File Amended Tax ReturnIrs Free Tax Return1040 Form 2011Www Irs Gov Form1040ezFree 10402010 Tax TablesFile Form 1040x FreeFree Taxes H And R BlockTurbotax Amended Return 20122010 Ez Tax Form1040nr Filing OnlineH & R Block Tax Software 2011Income Tax PreparationWww Free State Tax Return1040ez OnlineState Tax Preparation FreeFederal Income Tax Rates 2012H&r Block Tax Free2014 1040ez FormsFree State Return Only2011 TaxState Income Tax RatesFiling An Amended ReturnFile Federal And State Taxes FreeNeed 2009 Tax Return2012 Federal Tax Form 1040Free Tax Services OnlineHow Do You Amend A Tax Return1040x E FileFree Federal Tax Filing 2011File Your State Taxes Online For FreeEz FormsFile An Amended Tax Return OnlineHow To File A 2011 Tax Return For FreeCan I File 2010 Taxes In 2012Tax Software 1040nrCan You E File 2012 Taxes NowIrs 1040x FormsH&r Block Free State Tax E File

1040x H&r Block

1040x h&r block 13. 1040x h&r block   Payment of Taxes Table of Contents How To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule Generally, semimonthly deposits of excise taxes are required. 1040x h&r block A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period). 1040x h&r block However, no deposit is required for the situations listed below; the taxes are payable with Form 720. 1040x h&r block The net liability for taxes listed in Part I (Form 720) does not exceed $2,500 for the quarter. 1040x h&r block The gas guzzler tax is being paid on a one-time filing. 1040x h&r block The liability is for taxes listed in Part II (Form 720), except for the floor stocks tax which generally requires a single deposit. 1040x h&r block How To Make Deposits Electronic deposit requirement. 1040x h&r block   You must use electronic funds transfer to make excise tax deposits. 1040x h&r block Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040x h&r block If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. 1040x h&r block Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 1040x h&r block   EFTPS is a free service provided by the Department of Treasury. 1040x h&r block Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 1040x h&r block To get more information about EFTPS or to enroll in EFTPS, visit www. 1040x h&r block eftps. 1040x h&r block gov or call 1-800-555-4477. 1040x h&r block Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. 1040x h&r block    Depositing on time. 1040x h&r block For EFTPS deposits to be on time, you must initiate the transaction at least 1 day before the date the deposit is due (before 8:00 p. 1040x h&r block m. 1040x h&r block Eastern time). 1040x h&r block You will automatically be enrolled in EFTPS when you apply for an EIN. 1040x h&r block You will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN. 1040x h&r block When To Make Deposits There are two methods for determining deposits: the regular method and the alternative method. 1040x h&r block The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. 1040x h&r block See Alternative method below. 1040x h&r block If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period. 1040x h&r block Regular method. 1040x h&r block   The deposit of tax for a semimonthly period is due by the 14th day following that period. 1040x h&r block Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. 1040x h&r block If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday. 1040x h&r block Alternative method (IRS Nos. 1040x h&r block 22, 26, 27, and 28). 1040x h&r block   Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. 1040x h&r block Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. 1040x h&r block The deposit of tax is due by the 3rd banking day after the 7th day of that period. 1040x h&r block   For an example of the alternative method, see the Instructions for Form 720. 1040x h&r block To use the alternative method, you must keep a separate account of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. 1040x h&r block For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year. 1040x h&r block The separate account for each month must reflect: All items of tax included in amounts billed or tickets sold during the month, and Other items of adjustment relating to tax for prior months (within the statute of limitations on credits or refunds). 1040x h&r block The separate account for any month cannot include an adjustment resulting from a refusal to pay or inability to collect unless the refusal has been reported to the IRS. 1040x h&r block See Uncollected Tax Report in chapter 4. 1040x h&r block The net amount of tax that is considered collected during the semimonthly period must be either: The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month, or One-half of the net amount of tax reflected in the separate account for the preceding month. 1040x h&r block Special rule for deposits of taxes in September. 1040x h&r block   See the Instructions for Form 720 for a special rule on deposits made in September. 1040x h&r block Amount of Deposits Deposits for a semimonthly period generally must be at least 95% of the net tax liability for that period unless the safe harbor rule (discussed later) applies. 1040x h&r block Generally, you do not have to make a deposit for a period in which you incurred no tax liability. 1040x h&r block Net tax liability. 1040x h&r block   Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. 1040x h&r block You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. 1040x h&r block If you use this method, you must use it for all semimonthly periods in the calendar quarter. 1040x h&r block Do not reduce your liability by any amounts from Form 720X. 1040x h&r block Safe Harbor Rule The safe harbor rule applies separately to deposits under the regular method and the alternative method. 1040x h&r block Persons who filed Form 720 for the look-back quarter (the 2nd calendar quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly period in the current quarter is at least 1/6 (16. 1040x h&r block 67%) of the net tax liability reported for the look-back quarter. 1040x h&r block For the semimonthly period for which the additional deposit is required, the additional deposit must be at least 11/90 12. 1040x h&r block 23%), 10/90 (11. 1040x h&r block 12%) for non-EFTPS, of the net tax liability reported for the look-back quarter. 1040x h&r block Also, the total deposit for that semimonthly period must be at least 1/6 (16. 1040x h&r block 67%) of the net tax liability reported for the look-back quarter. 1040x h&r block Exceptions. 1040x h&r block   The safe harbor rule does not apply to: The 1st and 2nd quarters beginning on or after the effective date of an increase in the rate of tax unless the deposit of taxes for each semimonthly period in the calendar quarter is at least 1/6 (16. 1040x h&r block 67%) of the tax liability you would have had for the look-back quarter if the increased rate of tax had been in effect for that look-back quarter, Any quarter if liability includes any tax not in effect throughout the look-back quarter, or For deposits under the alternative method, any quarter if liability includes any tax not in effect throughout the look-back quarter and the month preceding the look-back quarter. 1040x h&r block Requirements to be met. 1040x h&r block   For the safe harbor rule to apply, you must: Make each deposit timely at an authorized financial institution, and Pay any underpayment for the current quarter by the due date of the return. 1040x h&r block    The IRS may withdraw the right to make deposits of tax using the safe harbor rule from any person not complying with these rules. 1040x h&r block Tax rate increases. 1040x h&r block   You must modify the safe harbor rule if there has been an increase in the rate of tax. 1040x h&r block You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. 1040x h&r block To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability. 1040x h&r block Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

IRS Criminal Investigation Issues Annual Report

IR-2014-18, Feb. 24, 2014
 

WASHINGTON — The Internal Revenue Service today announced the release of its IRS Criminal Investigation (CI) Annual Report for fiscal year 2013, reflecting significant increases in enforcement actions against tax criminals and a robust rise in convictions, including identity theft. 

CI investigates potential criminal violations of the Internal Revenue Code and related financial crimes in a manner to foster confidence in the tax system and compliance with the law.

High points of fiscal year 2013 include a 12.5 percent increase in investigations initiated compared to the prior year and a nearly 18 percent gain in prosecution recommendations. Specifically, CI initiated 5,314 cases and recommended 4,364 cases for prosecution. These increases were accomplished at a time when agent resources decreased more than 5 percent.

Meanwhile, convictions rose more than 25 percent compared to the prior year. The conviction rate for fiscal 2013 was 93 percent.

“The conviction rate is especially important because it reflects the quality of our case work, our teamwork with law enforcement partners and the U.S. Attorneys’ Offices, and it represents an increase over 2011 and 2012,” said Richard Weber, Chief of Criminal Investigation.

CI continues to play a vital role in the fight against identity theft. CI initiated over 1,400 investigations and recommended prosecution of over 1,250 individuals who were involved in identity theft crimes during fiscal 2013.

As an active partner in over 35 Identity Theft Task Forces, CI works side-by-side with federal, state and local law-enforcement agencies to combat the threat of this insidious crime. One of those task forces, the Tampa Bay Identity Theft Alliance, was recently recognized as the "2013 Task Force of the Year," a national award given by the International Association of Financial Crimes Investigators for investigative excellence and outstanding public service. The Tampa Bay Identity Theft Alliance was formed last year and comprises of 20 Tampa Bay federal, state and local law enforcement agencies and prosecutors.

“The Alliance represents true teamwork by all levels of law enforcement,” Weber said. “Individuals who commit identity theft demonstrate a blatant disregard of the integrity of the United States tax system and cause immeasurable hardship to innocent victims.”

In addition, the 36-page report summarizes a wide variety of IRS CI activity on a range of tax crimes, money laundering, public corruption, terrorist financing and narcotics trafficking financial crimes during the fiscal year ending Sept. 30, 2013.

“Our cases involved individuals and corporations from all segments of society. They led us into corporate board rooms, offices of public officials, tax preparation businesses, identity theft gangs and narcotics trafficking organizations,” Weber said.

"This report highlights some of the many noteworthy cases that were completed by CI, which is just the tip of the iceberg of the complex cases we completed this past year,” Weber added. “The dedication and enthusiasm of our employees was a driving force behind these achievements. IRS-CI continues to make our mark in history as the best financial investigators in the world."

Follow the IRS on New Media
Subscribe to IRS Newswire

Page Last Reviewed or Updated: 24-Feb-2014

The 1040x H&r Block

1040x h&r block 5. 1040x h&r block   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. 1040x h&r block Short-term lease. 1040x h&r block Retail space. 1040x h&r block Qualified long-term real property. 1040x h&r block Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. 1040x h&r block If there is a connection between any income you receive and your business, the income is business income. 1040x h&r block A connection exists if it is clear that the payment of income would not have been made if you did not have the business. 1040x h&r block You can have business income even if you are not involved in the activity on a regular full-time basis. 1040x h&r block Income from work you do on the side in addition to your regular job can be business income. 1040x h&r block You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. 1040x h&r block But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. 1040x h&r block For information on selling business assets, see chapter 3. 1040x h&r block Nonemployee compensation. 1040x h&r block Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. 1040x h&r block This includes amounts reported as nonemployee compensation in box 7 of the form. 1040x h&r block You can find more information in the instructions on the back of the Form 1099-MISC you received. 1040x h&r block Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. 1040x h&r block In most cases, your business income will be in the form of cash, checks, and credit card charges. 1040x h&r block But business income can be in other forms, such as property or services. 1040x h&r block These and other types of income are explained next. 1040x h&r block If you are a U. 1040x h&r block S. 1040x h&r block citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. 1040x h&r block S. 1040x h&r block law. 1040x h&r block If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. 1040x h&r block For details, see Publication 54, Tax Guide for U. 1040x h&r block S. 1040x h&r block Citizens and Resident Aliens Abroad. 1040x h&r block Bartering for Property or Services Bartering is an exchange of property or services. 1040x h&r block You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. 1040x h&r block If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. 1040x h&r block Example 1. 1040x h&r block You are a self-employed lawyer. 1040x h&r block You perform legal services for a client, a small corporation. 1040x h&r block In payment for your services, you receive shares of stock in the corporation. 1040x h&r block You must include the fair market value of the shares in income. 1040x h&r block Example 2. 1040x h&r block You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. 1040x h&r block You must include the fair rental value of the apartment in your gross receipts. 1040x h&r block Your landlord must include the fair market value of the work of art in his or her rental income. 1040x h&r block Example 3. 1040x h&r block You are a self-employed accountant. 1040x h&r block Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. 1040x h&r block Members get in touch with other members directly and bargain for the value of the services to be performed. 1040x h&r block In return for accounting services you provided for the house painter's business, the house painter painted your home. 1040x h&r block You must include in gross receipts the fair market value of the services you received from the house painter. 1040x h&r block The house painter must include the fair market value of your accounting services in his or her gross receipts. 1040x h&r block Example 4. 1040x h&r block You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. 1040x h&r block As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. 1040x h&r block You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. 1040x h&r block The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. 1040x h&r block It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. 1040x h&r block See Publication 15 (Circular E), Employer's Tax Guide. 1040x h&r block Example 5. 1040x h&r block You operate a plumbing business and use the cash method of accounting. 1040x h&r block You join a barter club and agree to provide plumbing services to any member for a specified number of hours. 1040x h&r block Each member has access to a directory that lists the members of the club and the services available. 1040x h&r block Members contact each other directly and request services to be performed. 1040x h&r block You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. 1040x h&r block You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. 1040x h&r block Information returns. 1040x h&r block   If you are involved in a bartering transaction, you may have to file either of the following forms. 1040x h&r block Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. 1040x h&r block Form 1099-MISC, Miscellaneous Income. 1040x h&r block For information about these forms, see the General Instructions for Certain Information Returns. 1040x h&r block Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. 1040x h&r block , who provides services (maid services, etc. 1040x h&r block ) for guests, report the rental income and expenses on Schedule C or C-EZ. 1040x h&r block If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. 1040x h&r block For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). 1040x h&r block Real estate dealer. 1040x h&r block   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. 1040x h&r block Rent you receive from real estate held for sale to customers is subject to SE tax. 1040x h&r block However, rent you receive from real estate held for speculation or investment is not subject to SE tax. 1040x h&r block Trailer park owner. 1040x h&r block   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. 1040x h&r block    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. 1040x h&r block Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. 1040x h&r block   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. 1040x h&r block   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. 1040x h&r block Hotels, boarding houses, and apartments. 1040x h&r block   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. 1040x h&r block   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. 1040x h&r block An example of a service that is not normally provided for the convenience of the occupants is maid service. 1040x h&r block However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. 1040x h&r block Prepaid rent. 1040x h&r block   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. 1040x h&r block This is true no matter what accounting method or period you use. 1040x h&r block Lease bonus. 1040x h&r block   A bonus you receive from a lessee for granting a lease is an addition to the rent. 1040x h&r block Include it in your gross receipts in the year received. 1040x h&r block Lease cancellation payments. 1040x h&r block   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. 1040x h&r block Payments to third parties. 1040x h&r block   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. 1040x h&r block A common example of this kind of income is a lessee's payment of your property taxes on leased real property. 1040x h&r block Settlement payments. 1040x h&r block   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. 1040x h&r block Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. 1040x h&r block ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. 1040x h&r block Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. 1040x h&r block If you receive any of those payments, include them in your gross receipts as explained in that discussion. 1040x h&r block Interest and Dividend Income Interest and dividends may be considered business income. 1040x h&r block Interest. 1040x h&r block   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. 1040x h&r block Interest received on loans is business income if you are in the business of lending money. 1040x h&r block Uncollectible loans. 1040x h&r block   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. 1040x h&r block If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. 1040x h&r block See Bad Debts in chapter 8. 1040x h&r block Unstated interest. 1040x h&r block   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. 1040x h&r block See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. 1040x h&r block Dividends. 1040x h&r block   Generally, dividends are business income to dealers in securities. 1040x h&r block For most sole proprietors and statutory employees, however, dividends are nonbusiness income. 1040x h&r block If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. 1040x h&r block   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. 1040x h&r block To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. 1040x h&r block Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. 1040x h&r block General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. 1040x h&r block Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. 1040x h&r block If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. 1040x h&r block Exceptions The following discussion covers some exceptions to the general rule for canceled debt. 1040x h&r block Price reduced after purchase. 1040x h&r block   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. 1040x h&r block Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. 1040x h&r block Deductible debt. 1040x h&r block   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. 1040x h&r block Example. 1040x h&r block You get accounting services for your business on credit. 1040x h&r block Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. 1040x h&r block Your accountant forgives part of the amount you owe for the accounting services. 1040x h&r block How you treat the canceled debt depends on your method of accounting. 1040x h&r block Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. 1040x h&r block Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. 1040x h&r block   For information on the cash and accrual methods of accounting, see chapter 2. 1040x h&r block Exclusions Do not include canceled debt in income in the following situations. 1040x h&r block However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. 1040x h&r block For more information, see Form 982. 1040x h&r block The cancellation takes place in a bankruptcy case under title 11 of the U. 1040x h&r block S. 1040x h&r block Code (relating to bankruptcy). 1040x h&r block See Publication 908, Bankruptcy Tax Guide. 1040x h&r block The cancellation takes place when you are insolvent. 1040x h&r block You can exclude the canceled debt to the extent you are insolvent. 1040x h&r block See Publication 908. 1040x h&r block The canceled debt is a qualified farm debt owed to a qualified person. 1040x h&r block See chapter 3 in Publication 225, Farmer's Tax Guide. 1040x h&r block The canceled debt is a qualified real property business debt. 1040x h&r block This situation is explained later. 1040x h&r block The canceled debt is qualified principal residence indebtedness which is discharged after 2006. 1040x h&r block See Form 982. 1040x h&r block If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. 1040x h&r block If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. 1040x h&r block Debt. 1040x h&r block   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. 1040x h&r block Qualified real property business debt. 1040x h&r block   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. 1040x h&r block If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. 1040x h&r block Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. 1040x h&r block However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. 1040x h&r block Cancellation of qualified real property business debt. 1040x h&r block   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. 1040x h&r block It was incurred or assumed in connection with real property used in a trade or business. 1040x h&r block It was secured by such real property. 1040x h&r block It was incurred or assumed at either of the following times. 1040x h&r block Before January 1, 1993. 1040x h&r block After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. 1040x h&r block It is debt to which you choose to apply these rules. 1040x h&r block   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. 1040x h&r block   You cannot exclude more than either of the following amounts. 1040x h&r block The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. 1040x h&r block The total adjusted bases of depreciable real property held by you immediately before the cancellation. 1040x h&r block These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. 1040x h&r block Do not take into account depreciable real property acquired in contemplation of the cancellation. 1040x h&r block Election. 1040x h&r block   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. 1040x h&r block You must file your return by the due date (including extensions). 1040x h&r block If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040x h&r block For more information, see When To File in the form instructions. 1040x h&r block Other Income The following discussion explains how to treat other types of business income you may receive. 1040x h&r block Restricted property. 1040x h&r block   Restricted property is property that has certain restrictions that affect its value. 1040x h&r block If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. 1040x h&r block However, you can choose to be taxed in the year you receive the property. 1040x h&r block For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. 1040x h&r block Gains and losses. 1040x h&r block   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. 1040x h&r block Instead, you must report these gains and losses on other forms. 1040x h&r block For more information, see chapter 3. 1040x h&r block Promissory notes. 1040x h&r block   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. 1040x h&r block In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. 1040x h&r block Lost income payments. 1040x h&r block   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. 1040x h&r block Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. 1040x h&r block Damages. 1040x h&r block   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. 1040x h&r block Patent infringement. 1040x h&r block Breach of contract or fiduciary duty. 1040x h&r block Antitrust injury. 1040x h&r block Economic injury. 1040x h&r block   You may be entitled to a deduction against the income if it compensates you for actual economic injury. 1040x h&r block Your deduction is the smaller of the following amounts. 1040x h&r block The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. 1040x h&r block Your loss from the injury that you have not yet deducted. 1040x h&r block Punitive damages. 1040x h&r block   You must also include punitive damages in income. 1040x h&r block Kickbacks. 1040x h&r block   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. 1040x h&r block However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. 1040x h&r block Recovery of items previously deducted. 1040x h&r block   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. 1040x h&r block However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. 1040x h&r block If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. 1040x h&r block Example. 1040x h&r block Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. 1040x h&r block He also had 2 personal exemptions for a total of $7,800. 1040x h&r block He would not pay income tax even if he did not deduct the bad debt. 1040x h&r block Therefore, he will not report as income any part of the $300 he may recover in any future year. 1040x h&r block Exception for depreciation. 1040x h&r block   This rule does not apply to depreciation. 1040x h&r block You recover depreciation using the rules explained next. 1040x h&r block Recapture of depreciation. 1040x h&r block   In the following situations, you have to recapture the depreciation deduction. 1040x h&r block This means you include in income part or all of the depreciation you deducted in previous years. 1040x h&r block Listed property. 1040x h&r block   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. 1040x h&r block You do this by including in income on Schedule C part of the depreciation you deducted in previous years. 1040x h&r block Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. 1040x h&r block For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. 1040x h&r block That chapter explains how to determine whether property is used more than 50% in your business. 1040x h&r block Section 179 property. 1040x h&r block   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. 1040x h&r block You do this by including in income on Schedule C part of the deduction you took. 1040x h&r block Use Part IV of Form 4797 to figure the amount to include on Schedule C. 1040x h&r block See chapter 2 in Publication 946 to find out when you recapture the deduction. 1040x h&r block Sale or exchange of depreciable property. 1040x h&r block   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. 1040x h&r block You figure the income due to depreciation recapture in Part III of Form 4797. 1040x h&r block For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. 1040x h&r block Items That Are Not Income In some cases the property or money you receive is not income. 1040x h&r block Appreciation. 1040x h&r block   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. 1040x h&r block Consignments. 1040x h&r block   Consignments of merchandise to others to sell for you are not sales. 1040x h&r block The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. 1040x h&r block Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. 1040x h&r block Merchandise you have shipped out on consignment is included in your inventory until it is sold. 1040x h&r block   Do not include merchandise you receive on consignment in your inventory. 1040x h&r block Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. 1040x h&r block Construction allowances. 1040x h&r block   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. 1040x h&r block Under a short-term lease of retail space. 1040x h&r block For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. 1040x h&r block Amount you can exclude. 1040x h&r block   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. 1040x h&r block Short-term lease. 1040x h&r block   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. 1040x h&r block The following rules apply in determining whether the lease is for 15 years or less. 1040x h&r block Take into account options to renew when figuring whether the lease is for 15 years or less. 1040x h&r block But do not take into account any option to renew at fair market value determined at the time of renewal. 1040x h&r block Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. 1040x h&r block Retail space. 1040x h&r block   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. 1040x h&r block Qualified long-term real property. 1040x h&r block   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. 1040x h&r block Exchange of like-kind property. 1040x h&r block   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. 1040x h&r block This means that the gain is not taxable and the loss is not deductible. 1040x h&r block A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. 1040x h&r block For more information, see Form 8824. 1040x h&r block Leasehold improvements. 1040x h&r block   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. 1040x h&r block However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. 1040x h&r block Loans. 1040x h&r block   Money borrowed through a bona fide loan is not income. 1040x h&r block Sales tax. 1040x h&r block   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. 1040x h&r block Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). 1040x h&r block Direct seller. 1040x h&r block   You must report all income you receive as a direct seller on Schedule C or C-EZ. 1040x h&r block This includes any of the following. 1040x h&r block Income from sales—payments you receive from customers for products they buy from you. 1040x h&r block Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. 1040x h&r block Prizes, awards, and gifts you receive from your selling business. 1040x h&r block You must report this income regardless of whether it is reported to you on an information return. 1040x h&r block   You are a direct seller if you meet all the following conditions. 1040x h&r block You are engaged in one of the following trades or businesses. 1040x h&r block Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. 1040x h&r block Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). 1040x h&r block Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. 1040x h&r block Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. 1040x h&r block Executor or administrator. 1040x h&r block   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. 1040x h&r block A nonprofessional fiduciary (personal representative) and both of the following apply. 1040x h&r block The estate includes an active trade or business in which you actively participate. 1040x h&r block Your fees are related to the operation of that trade or business. 1040x h&r block A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. 1040x h&r block    If the fees do not meet the above requirements, report them on line 21 of Form 1040. 1040x h&r block Fishing crew member. 1040x h&r block    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . 1040x h&r block Insurance agent, former. 1040x h&r block   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. 1040x h&r block You received payments after your agreement to perform services for the company ended. 1040x h&r block You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. 1040x h&r block You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. 1040x h&r block The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. 1040x h&r block The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). 1040x h&r block Insurance agent, retired. 1040x h&r block   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. 1040x h&r block Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. 1040x h&r block   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. 1040x h&r block Newspaper carrier or distributor. 1040x h&r block   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. 1040x h&r block You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). 1040x h&r block Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. 1040x h&r block You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. 1040x h&r block   This rule applies whether or not you hire others to help you make deliveries. 1040x h&r block It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. 1040x h&r block Newspaper or magazine vendor. 1040x h&r block   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. 1040x h&r block You sell newspapers or magazines to ultimate consumers. 1040x h&r block You sell them at a fixed price. 1040x h&r block Your earnings are based on the difference between the sales price and your cost of goods sold. 1040x h&r block   This rule applies whether or not you are guaranteed a minimum amount of earnings. 1040x h&r block It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. 1040x h&r block Notary public. 1040x h&r block   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. 1040x h&r block These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). 1040x h&r block Public official. 1040x h&r block   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. 1040x h&r block This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. 1040x h&r block Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. 1040x h&r block   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. 1040x h&r block Real estate agent or direct seller. 1040x h&r block   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. 1040x h&r block Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. 1040x h&r block You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. 1040x h&r block Securities dealer. 1040x h&r block   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. 1040x h&r block For more information, see sections 1256 and 1402(i). 1040x h&r block Securities trader. 1040x h&r block   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. 1040x h&r block As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. 1040x h&r block However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. 1040x h&r block For more information about securities traders, see Publication 550, Investment Income and Expenses. 1040x h&r block Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. 1040x h&r block This section discusses some of the more common differences that may affect business transactions. 1040x h&r block Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). 1040x h&r block If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. 1040x h&r block Dealers in real estate are not allowed to use inventories. 1040x h&r block For more information on inventories, see chapter 2. 1040x h&r block Income paid to a third party. 1040x h&r block   All income you earn is taxable to you. 1040x h&r block You cannot avoid tax by having the income paid to a third party. 1040x h&r block Example. 1040x h&r block You rent out your property and the rental agreement directs the lessee to pay the rent to your son. 1040x h&r block The amount paid to your son is gross income to you. 1040x h&r block Cash discounts. 1040x h&r block   These are amounts the seller permits you to deduct from the invoice price for prompt payment. 1040x h&r block For income tax purposes, you can use either of the following two methods to account for cash discounts. 1040x h&r block Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). 1040x h&r block Credit the cash discount to a discount income account. 1040x h&r block You must use the chosen method every year for all your purchase discounts. 1040x h&r block   If you use the second method, the credit balance in the account at the end of your tax year is business income. 1040x h&r block Under this method, you do not reduce the cost of goods sold by the cash discounts you received. 1040x h&r block When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. 1040x h&r block Trade discounts. 1040x h&r block   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. 1040x h&r block Do not enter these discounts on your books of account. 1040x h&r block Instead, use only the net amount as the cost of the merchandise purchased. 1040x h&r block For more information, see Trade discounts in chapter 6. 1040x h&r block Payment placed in escrow. 1040x h&r block   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. 1040x h&r block However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. 1040x h&r block Sales returns and allowances. 1040x h&r block   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. 1040x h&r block Advance payments. 1040x h&r block   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. 1040x h&r block Insurance proceeds. 1040x h&r block   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. 1040x h&r block You cannot deduct the reimbursed part of a casualty or theft loss. 1040x h&r block   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. 1040x h&r block Prev  Up  Next   Home   More Online Publications