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College Students Taxes

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College Students Taxes

College students taxes Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. College students taxes More information. College students taxes Exception—Community Income. College students taxes Exception—Qualified joint venture. College students taxes More information. College students taxes More information. College students taxes Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. College students taxes Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. College students taxes Table 1 can help you learn what those responsibilities are. College students taxes Ask yourself each question listed in the table, then see the related discussion to find the answer. College students taxes In addition to knowing about federal taxes, you need to make some basic business decisions. College students taxes Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. College students taxes For information on how to contact the SBA, see How to Get More Information, later. College students taxes Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. College students taxes When beginning a business, you must decide which form of business to use. College students taxes Legal and tax considerations enter into this decision. College students taxes Only tax considerations are discussed in this publication. College students taxes Your form of business determines which income tax return form you have to file. College students taxes See Table 2 to find out which form you have to file. College students taxes Sole proprietorships. College students taxes   A sole proprietorship is an unincorporated business that is owned by one individual. College students taxes It is the simplest form of business organization to start and maintain. College students taxes The business has no existence apart from you, the owner. College students taxes Its liabilities are your personal liabilities. College students taxes You undertake the risks of the business for all assets owned, whether or not used in the business. College students taxes You include the income and expenses of the business on your personal tax return. College students taxes More information. College students taxes   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. College students taxes If you are a farmer, see Publication 225, Farmer's Tax Guide. College students taxes Partnerships. College students taxes   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. College students taxes Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. College students taxes   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. College students taxes , from its operations, but it does not pay income tax. College students taxes Instead, it “passes through” any profits or losses to its partners. College students taxes Each partner includes his or her share of the partnership's items on his or her tax return. College students taxes More information. College students taxes   For more information on partnerships, see Publication 541, Partnerships. College students taxes Husband and wife business. College students taxes   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. College students taxes Do not use Schedule C or C-EZ. College students taxes Instead, file Form 1065, U. College students taxes S. College students taxes Return of Partnership Income. College students taxes For more information, see Publication 541, Partnerships. College students taxes Exception—Community Income. College students taxes   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. College students taxes S. College students taxes possession, you can treat the business either as a sole proprietorship or a partnership. College students taxes The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. College students taxes A change in your reporting position will be treated as a conversion of the entity. College students taxes Exception—Qualified joint venture. College students taxes   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. College students taxes Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. College students taxes For an explanation of "material participation," see the Instructions for Schedule C, line G. College students taxes   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. College students taxes Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. College students taxes For more information, see Qualified Joint Venture in the Instructions for Schedule SE. College students taxes Corporations. College students taxes   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. College students taxes A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. College students taxes A corporation can also take special deductions. College students taxes   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. College students taxes However, shareholders cannot deduct any loss of the corporation. College students taxes More information. College students taxes   For more information on corporations, see Publication 542, Corporations. College students taxes S corporations. College students taxes   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. College students taxes Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. College students taxes On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. College students taxes More information. College students taxes   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. College students taxes S. College students taxes Income Tax Return for an S Corporation. College students taxes Limited liability company. College students taxes   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. College students taxes The members of an LLC are not personally liable for its debts. College students taxes An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. College students taxes 7701-3. College students taxes For more information, see the instructions for Form 8832, Entity Classification Election. College students taxes Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. College students taxes The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). College students taxes An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. College students taxes An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. College students taxes You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. College students taxes You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. College students taxes This includes returns or documents filed to report the following information. College students taxes Interest, dividends, royalties, etc. College students taxes , paid to you. College students taxes Any amount paid to you as a dependent care provider. College students taxes Certain other amounts paid to you that total $600 or more for the year. College students taxes If you do not furnish your identification number as required, you may be subject to penalties. College students taxes See Penalties, later. College students taxes Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. College students taxes If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. College students taxes Applying for an EIN. College students taxes   You may apply for an EIN: Online—Click on the EIN link at www. College students taxes irs. College students taxes gov/businesses/small. College students taxes The EIN is issued immediately once the application information is validated. College students taxes By telephone at 1-800-829-4933. College students taxes By mailing or faxing Form SS-4, Application for Employer Identification Number. College students taxes When to apply. College students taxes   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. College students taxes If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. College students taxes If you apply by telephone or through the IRS website, you can get an EIN immediately. College students taxes If you apply by fax, you can get an EIN within 4 business days. College students taxes   If you do not receive your EIN by the time a return is due, file your return anyway. College students taxes Write “Applied for” and the date you applied for the number in the space for the EIN. College students taxes Do not use your social security number as a substitute for an EIN on your tax returns. College students taxes More than one EIN. College students taxes   You should have only one EIN. College students taxes If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. College students taxes Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. College students taxes The IRS will tell you which number to use. College students taxes More information. College students taxes   For more information about EINs, see Publication 1635, Understanding Your EIN. College students taxes Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). College students taxes The forms used to report these payments must include the payee's identification number. College students taxes Employee. College students taxes   If you have employees, you must get an SSN from each of them. College students taxes Record the name and SSN of each employee exactly as they are shown on the employee's social security card. College students taxes If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. College students taxes This may occur, for example, if the employee's name has changed due to marriage or divorce. College students taxes   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. College students taxes This form is available at SSA offices or by calling 1-800-772-1213. College students taxes It is also available from the SSA website at www. College students taxes ssa. College students taxes gov. College students taxes Other payee. College students taxes   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. College students taxes If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. College students taxes   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. College students taxes This form is available from IRS offices or by calling 1-800-829-3676. College students taxes It is also available from the IRS website at IRS. College students taxes gov. College students taxes    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. College students taxes For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. College students taxes Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. College students taxes A tax year is usually 12 consecutive months. College students taxes There are two kinds of tax years. College students taxes Calendar tax year. College students taxes A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. College students taxes Fiscal tax year. College students taxes A fiscal tax year is 12 consecutive months ending on the last day of any month except December. College students taxes A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. College students taxes If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. College students taxes You must use a calendar tax year if: You keep no books. College students taxes You have no annual accounting period. College students taxes Your present tax year does not qualify as a fiscal year. College students taxes You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. College students taxes For more information, see Publication 538, Accounting Periods and Methods. College students taxes First-time filer. College students taxes   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. College students taxes You adopt a tax year by filing your first income tax return using that tax year. College students taxes You have not adopted a tax year if you merely did any of the following. College students taxes Filed an application for an extension of time to file an income tax return. College students taxes Filed an application for an employer identification number. College students taxes Paid estimated taxes for that tax year. College students taxes Changing your tax year. College students taxes   Once you have adopted your tax year, you may have to get IRS approval to change it. College students taxes To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. College students taxes You may have to pay a fee. College students taxes For more information, see Publication 538. College students taxes Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. College students taxes You choose an accounting method for your business when you file your first income tax return. College students taxes There are two basic accounting methods. College students taxes Cash method. College students taxes Under the cash method, you report income in the tax year you receive it. College students taxes You usually deduct or capitalize expenses in the tax year you pay them. College students taxes Accrual method. College students taxes Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. College students taxes You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. College students taxes For other methods, see Publication 538. College students taxes If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. College students taxes Inventories include goods held for sale in the normal course of business. College students taxes They also include raw materials and supplies that will physically become a part of merchandise intended for sale. College students taxes Inventories are explained in Publication 538. College students taxes Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. College students taxes For more information, see Publication 538. College students taxes You must use the same accounting method to figure your taxable income and to keep your books. College students taxes Also, you must use an accounting method that clearly shows your income. College students taxes In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. College students taxes An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. College students taxes More than one business. College students taxes   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. College students taxes You must keep a complete and separate set of books and records for each business. College students taxes Changing your method of accounting. College students taxes   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. College students taxes A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. College students taxes For examples of changes that require approval and information on how to get approval for the change, see Publication 538. College students taxes Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. College students taxes The following are the four general kinds of business taxes. College students taxes Income tax. College students taxes Self-employment tax. College students taxes Employment taxes. College students taxes Excise taxes. College students taxes See Table 2 for the forms you file to report these taxes. College students taxes You may want to get Publication 509. College students taxes It has tax calendars that tell you when to file returns and make tax payments. College students taxes Income Tax All businesses except partnerships must file an annual income tax return. College students taxes Partnerships file an information return. College students taxes Which form you use depends on how your business is organized. College students taxes See Table 2 to find out which return you have to file. College students taxes The federal income tax is a pay-as-you-go tax. College students taxes You must pay the tax as you earn or receive income during the year. College students taxes An employee usually has income tax withheld from his or her pay. College students taxes If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. College students taxes If you are not required to make estimated tax payments, you may pay any tax due when you file your return. College students taxes Table 2. College students taxes Which Forms Must I File? IF you are a. College students taxes . College students taxes . College students taxes   THEN you may be liable for. College students taxes . College students taxes . College students taxes   Use Form. College students taxes . College students taxes . College students taxes Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. College students taxes 2 Various other schedules may be needed. College students taxes Estimated tax. College students taxes   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. College students taxes Sole proprietors, partners, and S corporation shareholders. College students taxes   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. College students taxes Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. College students taxes For more information, see Publication 505, Tax Withholding and Estimated Tax. College students taxes Corporations. College students taxes   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. College students taxes Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. College students taxes You must deposit the payments as explained later under Depositing Taxes. College students taxes For more information, see Publication 542. College students taxes Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. College students taxes Your payments of SE tax contribute to your coverage under the social security system. College students taxes Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. College students taxes You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. College students taxes Your net earnings from self-employment were $400 or more. College students taxes You had church employee income of $108. College students taxes 28 or more. College students taxes Use Schedule SE (Form 1040) to figure your SE tax. College students taxes For more information, see Publication 334, Tax Guide for Small Business. College students taxes You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. College students taxes The Social Security Administration (SSA) time limit for posting self-employment income. College students taxes   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. College students taxes If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. College students taxes The SSA will not change its records to increase your self-employment income. College students taxes Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. College students taxes Employment taxes include the following. College students taxes Social security and Medicare taxes. College students taxes Federal income tax withholding. College students taxes Federal unemployment (FUTA) tax. College students taxes If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. College students taxes If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. College students taxes These publications explain your tax responsibilities as an employer. College students taxes If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. College students taxes That publication has information to help you determine whether an individual is an employee or an independent contractor. College students taxes If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. College students taxes An independent contractor is someone who is self-employed. College students taxes Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. College students taxes Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. College students taxes To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. College students taxes Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). College students taxes Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. College students taxes Medicare tax pays for benefits under the hospital insurance part of FICA. College students taxes You withhold part of these taxes from your employee's wages and you pay a part yourself. College students taxes To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. College students taxes Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. College students taxes (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. College students taxes ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. College students taxes You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. College students taxes You pay FUTA tax only from your own funds. College students taxes Employees do not pay this tax or have it withheld from their pay. College students taxes Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. College students taxes See Publication 15 to find out if you can use this form. College students taxes Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. College students taxes Form I-9. College students taxes   You must verify that each new employee is legally eligible to work in the United States. College students taxes Both you and the employee must complete the U. College students taxes S. College students taxes Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. College students taxes You can get the form from USCIS offices or from the USCIS website at www. College students taxes uscis. College students taxes gov. College students taxes Call the USCIS at 1-800-375-5283 for more information about your responsibilities. College students taxes Form W-4. College students taxes   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. College students taxes You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. College students taxes For more information, see Publication 15. College students taxes Employees claiming more than 10 withholding allowances. College students taxes   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. College students taxes See section 16 of Publication 15. College students taxes Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. College students taxes You must also send copies to the Social Security Administration. College students taxes See Information Returns, later, for more information on Form W-2. College students taxes Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. College students taxes Manufacture or sell certain products. College students taxes Operate certain kinds of businesses. College students taxes Use various kinds of equipment, facilities, or products. College students taxes Receive payment for certain services. College students taxes For more information on excise taxes, see Publication 510, Excise Taxes. College students taxes Form 720. College students taxes   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. College students taxes Environmental taxes. College students taxes Communications and air transportation taxes. College students taxes Fuel taxes. College students taxes Tax on the first retail sale of heavy trucks, trailers, and tractors. College students taxes Manufacturers taxes on the sale or use of a variety of different articles. College students taxes Form 2290. College students taxes   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. College students taxes The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. College students taxes Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. College students taxes For more information, see the instructions for Form 2290. College students taxes Form 730. College students taxes   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. College students taxes Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. College students taxes Form 11-C. College students taxes   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. College students taxes Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. College students taxes Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). College students taxes Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. College students taxes Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. College students taxes Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. College students taxes The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. College students taxes You must give a copy of each information return you are required to file to the recipient or payer. College students taxes In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. College students taxes For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. College students taxes Form 1099-MISC. College students taxes   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. College students taxes These payments include the following items. College students taxes Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. College students taxes Rent payments of $600 or more, other than rents paid to real estate agents. College students taxes Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. College students taxes Royalty payments of $10 or more. College students taxes Payments to certain crew members by operators of fishing boats. College students taxes You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. College students taxes Form W-2. College students taxes   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. College students taxes For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. College students taxes Form 8300. College students taxes   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. College students taxes Cash includes U. College students taxes S. College students taxes and foreign coin and currency. College students taxes It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. College students taxes For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). College students taxes Penalties The law provides penalties for not filing returns or paying taxes as required. College students taxes Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. College students taxes Failure to file tax returns. College students taxes   If you do not file your tax return by the due date, you may have to pay a penalty. College students taxes The penalty is based on the tax not paid by the due date. College students taxes See your tax return instructions for more information about this penalty. College students taxes Failure to pay tax. College students taxes   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. College students taxes For more information, see your tax return instructions. College students taxes Failure to withhold, deposit, or pay taxes. College students taxes   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. College students taxes You may also be subject to penalties if you deposit the taxes late. College students taxes For more information, see Publication 15. College students taxes Failure to follow information reporting requirements. College students taxes   The following penalties apply if you are required to file information returns. College students taxes For more information, see the General Instructions for Certain Information Returns. College students taxes Failure to file information returns. College students taxes A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. College students taxes Failure to furnish correct payee statements. College students taxes A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. College students taxes Waiver of penalty. College students taxes   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. College students taxes   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. College students taxes (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. College students taxes ) Failure to supply taxpayer identification number. College students taxes   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. College students taxes You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. College students taxes Business Expenses You can deduct business expenses on your income tax return. College students taxes These are the current operating costs of running your business. College students taxes To be deductible, a business expense must be both ordinary and necessary. College students taxes An ordinary expense is one that is common and accepted in your field of business, trade, or profession. College students taxes A necessary expense is one that is helpful and appropriate for your business, trade, or profession. College students taxes An expense does not have to be indispensable to be considered necessary. College students taxes The following are brief explanations of some expenses that are of interest to people starting a business. College students taxes There are many other expenses that you may be able to deduct. College students taxes See your form instructions and Publication 535, Business Expenses. College students taxes Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. College students taxes Your business start-up costs will depend on the type of business you are starting. College students taxes They may include costs for advertising, travel, surveys, and training. College students taxes These costs are generally capital expenses. College students taxes You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). College students taxes You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. College students taxes The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. College students taxes Any remaining cost must be amortized. College students taxes For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. College students taxes Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. College students taxes You must spread the cost over more than one tax year and deduct part of it each year. College students taxes This method of deducting the cost of business property is called depreciation. College students taxes Business property you must depreciate includes the following items. College students taxes Office furniture. College students taxes Buildings. College students taxes Machinery and equipment. College students taxes You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. College students taxes This deduction is known as the “section 179 deduction. College students taxes ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. College students taxes Depreciation must be taken in the year it is allowable. College students taxes Allowable depreciation not taken in a prior year cannot be taken in the current year. College students taxes If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. College students taxes S. College students taxes Individual Income Tax Return, or by changing your accounting method. College students taxes For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. College students taxes Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. College students taxes Even then, your deduction may be limited. College students taxes To qualify to claim expenses for business use of your home, you must meet both the following tests. College students taxes Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. College students taxes Exclusive use. College students taxes   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. College students taxes The area used for business can be a room or other separately identifiable space. College students taxes The space does not need to be marked off by a permanent partition. College students taxes   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. College students taxes Exceptions to exclusive use. College students taxes   You do not have to meet the exclusive use test if either of the following applies. College students taxes You use part of your home for the storage of inventory or product samples. College students taxes You use part of your home as a daycare facility. College students taxes For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). College students taxes Principal place of business. College students taxes   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. College students taxes You use it exclusively and regularly for administrative or management activities of your trade or business. College students taxes You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. College students taxes   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. College students taxes The relative importance of the activities performed at each location. College students taxes If the relative importance factor does not determine your principal place of business, the time spent at each location. College students taxes    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. College students taxes However, for other ways to qualify to deduct home office expenses, see Publication 587. College students taxes Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. College students taxes If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. College students taxes More information. College students taxes   For more information about business use of your home, see Publication 587. College students taxes Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. College students taxes You generally can deduct either your actual expenses or the standard mileage rate. College students taxes Actual expenses. College students taxes   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. College students taxes You can divide your expenses based on the miles driven for each purpose. College students taxes Example. College students taxes You are the sole proprietor of a flower shop. College students taxes You drove your van 20,000 miles during the year. College students taxes 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. College students taxes You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. College students taxes Standard mileage rate. College students taxes   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. College students taxes You can use the standard mileage rate for a vehicle you own or lease. College students taxes The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. College students taxes It is announced annually by the IRS. College students taxes To figure your deduction, multiply your business miles by the standard mileage rate for the year. College students taxes    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. College students taxes However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. College students taxes Choosing the standard mileage rate. College students taxes   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. College students taxes In later years, you can choose to use either the standard mileage rate or actual expenses. College students taxes   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). College students taxes Additional information. College students taxes   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. College students taxes Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. College students taxes It also explains how long you must keep your records for federal tax purposes. College students taxes A sample recordkeeping system is illustrated at the end of this part. College students taxes Why Keep Records? Everyone in business must keep records. College students taxes Good records will help you do the following. College students taxes Monitor the progress of your business. College students taxes   You need good records to monitor the progress of your business. College students taxes Records can show whether your business is improving, which items are selling, or what changes you need to make. College students taxes Good records can increase the likelihood of business success. College students taxes Prepare your financial statements. College students taxes   You need good records to prepare accurate financial statements. College students taxes These include income (profit and loss) statements and balance sheets. College students taxes These statements can help you in dealing with your bank or creditors and help you manage your business. College students taxes An income statement shows the income and expenses of the business for a given period of time. College students taxes A balance sheet shows the assets, liabilities, and your equity in the business on a given date. College students taxes Identify source of receipts. College students taxes   You will receive money or property from many sources. College students taxes Your records can identify the source of your receipts. College students taxes You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. College students taxes Keep track of deductible expenses. College students taxes   You may forget expenses when you prepare your tax return unless you record them when they occur. College students taxes Prepare your tax returns. College students taxes   You need good records to prepare your tax returns. College students taxes These records must support the income, expenses, and credits you report. College students taxes Generally, these are the same records you use to monitor your business and prepare your financial statements. College students taxes Support items reported on tax returns. College students taxes   You must keep your business records available at all times for inspection by the IRS. College students taxes If the IRS examines any of your tax returns, you may be asked to explain the items reported. College students taxes A complete set of records will speed up the examination. College students taxes Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. College students taxes You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. College students taxes The business you are in affects the type of records you need to keep for federal tax purposes. College students taxes You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. College students taxes See Accounting Method, earlier. College students taxes If you are in more than one business, you should keep a complete and separate set of records for each business. College students taxes A corporation should keep minutes of board of directors' meetings. College students taxes Your recordkeeping system should include a summary of your business transactions. College students taxes This summary is ordinarily made in your books (for example, accounting journals and ledgers). College students taxes Your books must show your gross income, as well as your deductions and credits. College students taxes For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. College students taxes In addition, you must keep supporting documents, explained later. College students taxes Electronic records. College students taxes   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. College students taxes When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. College students taxes An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. College students taxes The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. College students taxes All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. College students taxes Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. College students taxes   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. College students taxes You still have the responsibility of retaining any other books and records that are required to be retained. College students taxes   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. College students taxes This test is not considered an examination and the results must be shared with you. College students taxes If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. College students taxes If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. College students taxes For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. College students taxes Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. College students taxes Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. College students taxes These documents contain information you need to record in your books. College students taxes It is important to keep these documents because they support the entries in your books and on your tax return. College students taxes Keep them in an orderly fashion and in a safe place. College students taxes For instance, organize them by year and type of income or expense. College students taxes Gross receipts. College students taxes   Gross receipts are the income you receive from your business. College students taxes You should keep supporting documents that show the amounts and sources of your gross receipts. College students taxes Documents that show gross receipts include the following. College students taxes Cash register tapes. College students taxes Bank deposit slips. College students taxes Receipt books. College students taxes Invoices. College students taxes Credit card charge slips. College students taxes Forms 1099-MISC. College students taxes Purchases. College students taxes   Purchases are the items you buy and resell to customers. College students taxes If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. College students taxes Your supporting documents should show the amount paid and that the amount was for purchases. College students taxes Documents for purchases include the following. College students taxes Canceled checks. College students taxes Cash register tape receipts. College students taxes Credit card sales slips. College students taxes Invoices. College students taxes These records will help you determine the value of your inventory at the end of the year. College students taxes See Publication 538 for information on methods for valuing inventory. College students taxes Expenses. College students taxes   Expenses are the costs you incur (other than purchases) to carry on your business. College students taxes Your supporting documents should show the amount paid and that the amount was for a business expense. College students taxes Documents for expenses include the following. College students taxes Canceled checks. College students taxes Cash register tapes. College students taxes Account statements. College students taxes Credit card sales slips. College students taxes Invoices. College students taxes Petty cash slips for small cash payments. College students taxes    A petty cash fund allows you to make small payments without having to write checks for small amounts. College students taxes Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. College students taxes Travel, transportation, entertainment, and gift expenses. College students taxes   Specific recordkeeping rules apply to these expenses. College students taxes For more information, see Publication 463. College students taxes Employment taxes. College students taxes   There are specific employment tax records you must keep. College students taxes For a list, see Publication 15. College students taxes Assets. College students taxes   Assets are the property, such as machinery and furniture you own and use in your business. College students taxes You must keep records to verify certain information about your business assets. College students taxes You need records to figure the annual depreciation and the gain or loss when you sell the assets. College students taxes Your records should show the following information. College students taxes When and how you acquired the asset. College students taxes Purchase price. College students taxes Cost of any improvements. College students taxes Section 179 deduction taken. College students taxes Deductions taken for depreciation. College students taxes Deductions taken for casualty losses, such as losses resulting from fires or storms. College students taxes How you used the asset. College students taxes When and how you disposed of the asset. College students taxes Selling price. College students taxes Expenses of sale. College students taxes   The following documents may show this information. College students taxes Purchase and sales invoices. College students taxes Real estate closing statements. College students taxes Canceled checks. College students taxes What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. College students taxes These include account statements prepared for the financial institution by a third party. College students taxes These account statements must be highly legible. College students taxes The following table lists acceptable account statements. College students taxes  IF payment is by. College students taxes . College students taxes . College students taxes THEN the statement must show the. College students taxes . College students taxes . College students taxes Check Check number. College students taxes Amount. College students taxes Payee's name. College students taxes Date the check amount was posted to the account by the financial institution. College students taxes Electronic funds transfer Amount transferred. College students taxes Payee's name. College students taxes Date the transfer was posted to the account by the financial institution. College students taxes Credit card Amount charged. College students taxes Payee's name. College students taxes Transaction date. College students taxes    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. College students taxes You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. College students taxes Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. College students taxes (Your business transactions are shown on the supporting documents just discussed. College students taxes ) Business transactions are ordinarily summarized in books called journals and ledgers. College students taxes You can buy them at your local stationery or office supply store. College students taxes A journal is a book where you record each business transaction shown on your supporting documents. College students taxes You may have to keep separate journals for transactions that occur frequently. College students taxes A ledger is a book that contains the totals from all of your journals. College students taxes It is organized into different accounts. College students taxes Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. College students taxes For example, a recordkeeping system for a small business might include the following items. College students taxes Business checkbook. College students taxes Daily summary of cash receipts. College students taxes Monthly summary of cash receipts. College students taxes Check disbursements journal. College students taxes Depreciation worksheet. College students taxes Employee compensation record. College students taxes The business checkbook is explained next. College students taxes The other items are illustrated later under Sample Record System. College students taxes The system you use to record business transactions will be more effective if you follow good recordkeeping practices. College students taxes For example, record expenses when they occur, and identify the source of recorded receipts. College students taxes Generally, it is best to record transactions on a daily basis. College students taxes Business checkbook. College students taxes   One of the first things you should do when you start a business is open a business checking account. College students taxes You should keep your business account separate from your personal checking account. College students taxes   The business checkbook is your basic source of information for recording your business expenses. College students taxes You should deposit all daily receipts in your business checking account. College students taxes You should check your account for errors by reconciling it. College students taxes See Reconciling the checking account, later. College students taxes   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. College students taxes You should also note on the deposit slip the source of the deposit and keep copies of all slips. College students taxes   You should make all payments by check to document business expenses. College students taxes Write checks payable to yourself only when making withdrawals from your business for personal use. College students taxes Avoid writing checks payable to cash. College students taxes If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. College students taxes If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. College students taxes    Use the business account for business purposes only. College students taxes Indicate the source of deposits and the type of expense in the checkbook. College students taxes Reconciling the checking account. College students taxes   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. College students taxes The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. College students taxes   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. College students taxes    You should reconcile your checking account each month. College students taxes     Before you reconcile your monthly bank statement, check your own figures. College students taxes Begin with the balance shown in your checkbook at the end of the previous month. College students taxes To this balance, add the total cash deposited during the month and subtract the total cash disbursements. College students taxes   After checking your figures, the result should agree with your checkbook balance at the end of the month. College students taxes If the result does not agree, you may have made an error in recording a check or deposit. College students taxes You can find the error by doing the following. College students taxes Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. College students taxes If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. College students taxes Adding the deposit amounts in your checkbook. College students taxes Compare that total with the monthly total in your cash receipt book, if you have one. College students taxes If the totals do not agree, check the individual amounts to find any errors. College students taxes   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. College students taxes   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. College students taxes Many banks print a reconciliation worksheet on the back of the statement. College students taxes   To reconcile your account, follow these steps. College students taxes Compare the deposits listed on the bank statement with the deposits shown in your checkbook. College students taxes Note all differences in the dollar amounts. College students taxes Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. College students taxes Note all differences in the dollar amounts. College students taxes Mark the check number in the checkbook as having cleared the bank. College students taxes After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. College students taxes Prepare a bank reconciliation. College students taxes One is illustrated later under Sample Record System. College students taxes Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. College students taxes At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. College students taxes If you still have differences, check the previous steps to find the errors. College students taxes   Table 3. College students taxes Period of Limitations IF you. College students taxes . College students taxes . College students taxes   THEN the period is. College students taxes . College students taxes . College students taxes 1. College students taxes Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. College students taxes Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. College students taxes File a fraudulent return   Not limited 4. College students taxes Do not file a return   Not limited 5. College students taxes File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. College students taxes File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. College students taxes The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. College students taxes You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. College students taxes Single-entry. College students taxes   A single-entry system is based on the income statement (profit or loss statement). College students taxes It can be a simple and practical system if you are starting a small business. College students taxes The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. College students taxes Double-entry. College students taxes   A double-entry bookkeeping system uses journals and ledgers. College students taxes Transactions are first entered in a journal and then posted to ledger accounts. College students taxes These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). College students taxes You close income and expense accounts at the end of each tax year. College students taxes You keep asset, liability, and net worth accounts open on a permanent basis. College students taxes   In the double-entry system, each account has a left side for debits and a right side for credits. College students taxes It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. College students taxes   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. College students taxes If the amounts do not balance, you have made an error and you must find and correct it. College students taxes   An example of a journal entry exhibiting a payment of rent in October is shown next. College students taxes General Journal Date Description of Entry Debit  Credit Oct. College students taxes 5 Rent expense 780. College students taxes 00     Cash   780. College students taxes 00                 Computerized System There are computer software packages you can use for recordkeeping. College students taxes They can be purchased in many retail stores. College students taxes These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. College students taxes If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. College students taxes To meet this qualification, the machine-sensible records must reconcile with your books and return. College students taxes These records must provide enough detail to identify the underlying source documents. College students taxes You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. College students taxes This documentation must be sufficiently detailed to show all of the following items. College students taxes Functions being performed as the data flows through the system. College students taxes Controls used to ensure accurate and reliable processing. College students taxes Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. College students taxes Charts of accounts and detailed account descriptions. College students taxes See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. College students taxes How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. College students taxes Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. College students taxes The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. College students taxes Table 3 contains the periods of limitations that apply to income tax returns. College students taxes Unless otherwise stated, the years refer to the period after the return was filed. College students taxes Returns filed before the due date are treated as filed on the due date. College students taxes Keep copies of your filed tax returns. College students taxes They help in preparing future tax returns and making computations if you file an amended return. College students taxes Employment taxes. College students taxes   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. College students taxes For more information about recordkeeping for employment taxes, see Publication 15. College students taxes Assets. College students taxes   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. College students taxes You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. College students taxes   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. College students taxes You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. College students taxes Records for nontax purposes. College students taxes   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. College students taxes For example, your insurance company or creditors may require you to keep them longer than the IRS does. College students taxes Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. College students taxes Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. College students taxes These sample records should not be viewed as a recommendation of how to keep your records. College students taxes They are intended only to show how one business keeps its records. College students taxes 1. College students taxes Daily Summary of Cash Receipts This summary is a record of cash sales for the day. College students taxes It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. College students taxes Henry takes the cash sales entry from his cash register tape. College students taxes If he had no cash register, he would simply total his cash sale slips and any other cash received that day. College students taxes He carries the total receipts shown in this summary for January 3 ($267. College students taxes 80), including cash sales ($263. College students taxes 60) and sales tax ($4. College students taxes 20), to the Monthly Summary of Cash Receipts. College students taxes Petty cash fund. College students taxes   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. College students taxes Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. College students taxes He sets up a fixed amount ($50) in his petty cash fund. College students taxes The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. College students taxes When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. College students taxes (See the Check Disbursements Journal entry for check number 92. College students taxes ) This restores the fund to its fixed amount of $50. College students taxes He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. College students taxes 2. College students taxes Monthly Summary of Cash Receipts This shows the income activity for the month. College students taxes Henry carries the total monthly net sales shown in this summary for January ($4,865. College students taxes 05) to his Annual Summary. College students taxes To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. College students taxes He cannot take a deduction for sales tax turned over to the state because he only collected the tax. College students taxes He does not include the tax in his income. College students taxes 3. College students taxes Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. College students taxes All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. College students taxes Frequent expenses have their own headings across the sheet. College students taxes He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. College students taxes Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. College students taxes Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. College students taxes If he did, he would record them in the journal, even though he could not deduct them as business expenses. College students taxes Henry carries the January total of expenses for materials ($1,083. College students taxes 50) to the Annual Summary. College students taxes Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. College students taxes , in the appropriate columns of that summary. College students taxes 4. College students taxes Employee Compensation Record This record shows the following information. College students taxes The number of hours Henry's employee worked in a pay period. College students taxes The employee's total pay for the period. College students taxes The deductions Henry withheld in figuring the employee's net pay. College students taxes The monthly gross payroll. College students taxes Henry carries the January gross payroll ($520) to the Annual Summary. College students taxes 5. College students taxes Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. College students taxes He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. College students taxes He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. College students taxes As in the journal, he keeps each major expense in a separate column. College students taxes Henry carries the cash receipts total shown in the annual summary ($47,440. College students taxes 9
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College students taxes Index , Hardest Hit Fund and Emergency Homeowners' Loan Programs. College students taxes , Form 1098. College students taxes , How To Report, Form 1098. College students taxes A Acquisition debt, Fully deductible interest. College students taxes , Home Acquisition Debt, Part of home not a qualified home. College students taxes Alimony, Divorced or separated individuals. College students taxes Amortization Points, General Rule Appraisal fees, Amounts charged for services. College students taxes Armed forces Housing allowance, Ministers' and military housing allowance. College students taxes Assistance (see Tax help) Average mortgage balance, Average Mortgage Balance B Borrowers More than one, More than one borrower. College students taxes Seller-paid points, treatment by buyer, Treatment by buyer. College students taxes Business Average mortgage balance, total amount of interest otherwise allowable to each activity, Line 13 Mortgage proceeds used for, Mortgage proceeds used for business or investment. College students taxes C Clergy Ministers' and military housing allowance, Ministers' and military housing allowance. College students taxes Cooperative housing, Cooperative apartment owner. College students taxes , Cooperative apartment owner. College students taxes , Special Rule for Tenant-Stockholders in Cooperative Housing Corporations, Form 1098. College students taxes Cost of home or improvements, Cost of home or improvements. College students taxes Credits, Mortgage interest credit. College students taxes D Date of mortgage, Date of the mortgage. College students taxes Debt Choice to treat as not secured by home, Choice to treat the debt as not secured by your home. College students taxes Grandfathered, Fully deductible interest. College students taxes , Grandfathered Debt, Line-of-credit mortgage. College students taxes Home acquisition, Fully deductible interest. College students taxes , Home Acquisition Debt Home equity, Fully deductible interest. College students taxes , Home Equity Debt Home equity only (Table 1), Home equity debt only. College students taxes Not secured by home, Debt not secured by home. College students taxes Secured, Secured Debt Deductions, Part I. College students taxes Home Mortgage Interest, Hardest Hit Fund and Emergency Homeowners' Loan Programs. College students taxes Home office, Office in home. College students taxes Mortgage insurance premiums, Claiming your deductible mortgage insurance premiums. College students taxes Points, General Rule, Claiming your deductible points. College students taxes Deed preparation costs, Amounts charged for services. College students taxes Divorced taxpayers, Divorced or separated individuals. College students taxes , Acquiring an interest in a home because of a divorce. College students taxes E Emergency Homeowners' Loan Program, Hardest Hit Fund and Emergency Homeowners' Loan Programs. College students taxes Equity debt, Fully deductible interest. College students taxes , Home Equity Debt, Fair market value (FMV). College students taxes Equity debt only (Table 1), Home equity debt only. College students taxes F Fair market value (FMV), Fair market value (FMV). College students taxes Fees Appraisal, Amounts charged for services. College students taxes Notaries, Amounts charged for services. College students taxes Points (see Points) Figures (see Tables and figures) Form 1040, Schedule A, How To Report, Table 2. College students taxes Where To Deduct Your Interest Expense Form 1040, Schedule C or C-EZ, Table 2. College students taxes Where To Deduct Your Interest Expense Form 1040, Schedule E, Table 2. College students taxes Where To Deduct Your Interest Expense Form 1040, Schedule F, Table 2. College students taxes Where To Deduct Your Interest Expense Form 1098, Form 1098, Mortgage Interest Statement Mortgage insurance premiums, Form 1098. College students taxes Form 8396, Mortgage interest credit. College students taxes Free tax services, Free help with your tax return. College students taxes G Grandfathered debt, Fully deductible interest. College students taxes , Grandfathered Debt, Line-of-credit mortgage. College students taxes Ground rents, Redeemable ground rents. College students taxes H Hardest Hit Fund Program, Hardest Hit Fund and Emergency Homeowners' Loan Programs. College students taxes Help (see Tax help) Home, Publication 936 - Introductory Material Acquisition debt, Fully deductible interest. College students taxes , Home Acquisition Debt Construction, Home under construction. College students taxes Cost of, Cost of home or improvements. College students taxes Destroyed, Home destroyed. College students taxes Divided use, Divided use of your home. College students taxes , Part of home not a qualified home. College students taxes , Part of home not a qualified home. College students taxes Equity debt, Fully deductible interest. College students taxes , Home Equity Debt Equity debt only (Table 1), Home equity debt only. College students taxes Fair market value, Fair market value (FMV). College students taxes Grandfathered debt, Fully deductible interest. College students taxes , Grandfathered Debt, Line-of-credit mortgage. College students taxes Improvement loan, points, Home improvement loan. College students taxes Main, Main home. College students taxes Office in, Office in home. College students taxes Qualified, Qualified Home Renting out part of, Renting out part of home. College students taxes Sale of, Sale of home. College students taxes Second, Second home. College students taxes Time-sharing arrangements, Time-sharing arrangements. College students taxes Housing allowance Ministers and military, Ministers' and military housing allowance. College students taxes I Improvements Cost of, Cost of home or improvements. College students taxes Home acquisition debt, Mortgage treated as used to buy, build, or improve home. College students taxes Points, Home improvement loan. College students taxes Substantial, Substantial improvement. College students taxes Interest, Part I. College students taxes Home Mortgage Interest (see also Mortgage interest) Interest rate method, Interest paid divided by interest rate method. College students taxes Refunded, Refunds of interest. College students taxes , Refunded interest. College students taxes Where to deduct, Table 2. College students taxes Where To Deduct Your Interest Expense Investments Average mortgage balance and total amount of interest allowable, Line 13 Mortgage proceeds used for, Mortgage proceeds invested in tax-exempt securities. College students taxes , Mortgage proceeds used for business or investment. College students taxes J Joint returns, Married taxpayers. College students taxes L Lender mortgage statements, Statements provided by your lender. College students taxes Limits Cooperative housing, mortgage interest deduction, Limits on deduction. College students taxes Deductibility of mortgage insurance premiums, Limit on deduction. College students taxes Deductibility of points, Limits on deduction. College students taxes Home acquisition debt, Home acquisition debt limit. College students taxes Home equity debt, Home equity debt limit. College students taxes Home mortgage interest deduction, Form 1098. College students taxes Qualified loan limit, Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes , Average Mortgage Balance Line-of-credit mortgage, Line-of-credit mortgage. College students taxes Loans, Mortgage proceeds used for business or investment. College students taxes , Mortgage treated as used to buy, build, or improve home. College students taxes (see also Mortgages) Home improvement, points, Home improvement loan. College students taxes Qualified loan limit, Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes M Main home, Main home. College students taxes Married taxpayers, Married taxpayers. College students taxes Military housing allowance, Ministers' and military housing allowance. College students taxes Ministers' housing allowance, Ministers' and military housing allowance. College students taxes Missing children, photographs of, Reminders Mixed-use mortgages, Mixed-use mortgages. College students taxes Mortgage insurance premiums Claiming deductible, Claiming your deductible mortgage insurance premiums. College students taxes Mortgage interest, Publication 936 - Introductory Material, Part I. College students taxes Home Mortgage Interest Cooperative housing, Figuring deductible home mortgage interest. College students taxes Credit, Mortgage interest credit. College students taxes Fully deductible interest, Fully deductible interest. College students taxes Home mortgage interest, Part I. College students taxes Home Mortgage Interest, Hardest Hit Fund and Emergency Homeowners' Loan Programs. College students taxes How to report, How To Report Late payment charges, Late payment charge on mortgage payment. College students taxes Limits on deduction, Part II. College students taxes Limits on Home Mortgage Interest Deduction Ministers' and military housing allowance, Ministers' and military housing allowance. College students taxes Prepaid interest, Prepaid interest. College students taxes , Prepaid interest on Form 1098. College students taxes Prepayment penalty, Mortgage prepayment penalty. College students taxes Refunds, Refunds of interest. College students taxes , Refunded interest. College students taxes Sale of home, Sale of home. College students taxes Special situations, Special Situations Statement, Form 1098, Mortgage Interest Statement Where to deduct, Table 2. College students taxes Where To Deduct Your Interest Expense Worksheet to figure (Table 1), Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes Mortgages Assistance payments (under sec. College students taxes 235 of National Housing Act), Mortgage assistance payments under section 235 of the National Housing Act. College students taxes Average balance, Average Mortgage Balance Date of, Date of the mortgage. College students taxes Ending early, Mortgage ending early. College students taxes Late qualifying, Mortgage that qualifies later. College students taxes Line-of-credit, Line-of-credit mortgage. College students taxes Mixed-use, Mixed-use mortgages. College students taxes Preparation costs for note or deed of trust, Amounts charged for services. College students taxes Proceeds invested in tax-exempt securities, Mortgage proceeds invested in tax-exempt securities. College students taxes Proceeds used for business, Mortgage proceeds used for business or investment. College students taxes Proceeds used for investment, Mortgage proceeds used for business or investment. College students taxes Qualified loan limit, Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes , Average Mortgage Balance Refinanced, Refinancing. College students taxes , Refinanced home acquisition debt. College students taxes , Refinanced grandfathered debt. College students taxes Reverse, Reverse mortgages. College students taxes Statements provided by lender, Statements provided by your lender. College students taxes To buy, build, or improve, Mortgage treated as used to buy, build, or improve home. College students taxes Wraparound, Wraparound mortgage. College students taxes N Nonredeemable ground rents, Nonredeemable ground rents. College students taxes Notary fees, Amounts charged for services. College students taxes O Office in home, Office in home. College students taxes P Penalties Mortgage prepayment, Mortgage prepayment penalty. College students taxes Points, Points, Deduction Allowed in Year Paid, Form 1098. College students taxes Claiming deductible, Claiming your deductible points. College students taxes Exception to general rule, Deduction Allowed in Year Paid Excess, Excess points. College students taxes Funds provided less than, Funds provided are less than points. College students taxes General rule, General Rule Home improvement loans, Home improvement loan. College students taxes Seller paid, Points paid by the seller. College students taxes Prepaid interest, Prepaid interest. College students taxes , Prepaid interest on Form 1098. College students taxes Prepayment penalties, Mortgage prepayment penalty. College students taxes Publications (see Tax help) Q Qualified homes, Qualified Home Qualified loan limit Average mortgage balance, Average Mortgage Balance Worksheet to figure (Table 1), Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes R Redeemable ground rents, Redeemable ground rents. College students taxes Refinancing, Refinancing. College students taxes Grandfathered debt, Refinanced grandfathered debt. College students taxes Home acquisition debt, Refinanced home acquisition debt. College students taxes Refunds, Refunds of interest. College students taxes , Refunded interest. College students taxes Rent Nonredeemable ground rents, Nonredeemable ground rents. College students taxes Redeemable ground rents, Redeemable ground rents. College students taxes Rental payments, Rental payments. College students taxes Renting of home Part of, Renting out part of home. College students taxes Time-sharing arrangements, Rental of time-share. College students taxes Repairs, Substantial improvement. College students taxes Reverse Mortgages, Reverse mortgages. College students taxes S Sale of home, Sale of home. College students taxes Second home, Second home. College students taxes , Deduction Allowed in Year Paid Secured debt, Secured Debt Seller-paid points, Points paid by the seller. College students taxes Separate returns, Separate returns. College students taxes Separated taxpayers, Divorced or separated individuals. College students taxes Spouses, Married taxpayers. College students taxes Statements provided by lender, Statements provided by your lender. College students taxes Stock Cooperative housing, Stock used to secure debt. College students taxes T Tables and figures Deductible home mortgage interest Fully deductible, determination of (Figure A), Fully deductible interest. College students taxes How to figure (Table 1), Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes Mortgage to buy, build, or improve home (Figure C), Mortgage treated as used to buy, build, or improve home. College students taxes Points (Figure B), Points Qualified loan limit worksheet (Table 1), Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes Tax credits, Mortgage interest credit. College students taxes Tax help, How To Get Tax Help Tax-exempt securities Mortgage proceeds invested in, Mortgage proceeds invested in tax-exempt securities. College students taxes Time-sharing arrangements, Time-sharing arrangements. College students taxes V Valuation Fair market value, Fair market value (FMV). College students taxes W Worksheets Deductible home mortgage interest, Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes Qualified loan limit, Table 1. College students taxes Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. College students taxes Wraparound mortgages, Wraparound mortgage. College students taxes Prev  Up     Home   More Online Publications