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Extention

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Extention 17. Extention   How To Get Tax Help Table of Contents Go online, use a smart phone, call or walk in to an office near you. Extention Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Extention Free help with your tax return. Extention   Free help in preparing your return is available nationwide from IRS-certified volunteers. Extention The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Extention The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Extention Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Extention Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Extention To find the nearest VITA or TCE site, visit IRS. Extention gov or call 1-800-906-9887. Extention   As part of the TCE program, AARP offers the Tax-Aide counseling program. Extention To find the nearest AARP Tax-Aide site, visit AARP's website at www. Extention aarp. Extention org/money/taxaide or call 1-888-227-7669. Extention   For more information on these programs, go to IRS. Extention gov and enter “VITA” in the search box. Extention Internet. Extention IRS. Extention gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Extention Apply for an Employer Identification Number (EIN). Extention Go to IRS. Extention gov and enter Apply for an EIN in the search box. Extention Request an Electronic Filing PIN by going to IRS. Extention gov and entering Electronic Filing PIN in the search box. Extention Download forms, instructions, and publications, including some accessible versions. Extention Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Extention gov or IRS2Go. Extention Tax return and tax account transcripts are generally available for the current year and past three years. Extention Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Extention gov or IRS2Go. Extention Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Extention An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Extention Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Extention If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Extention Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Extention Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Extention gov. Extention Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Extention The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Extention Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Extention AARP offers the Tax-Aide counseling program as part of the TCE program. Extention Visit AARP's website to find the nearest Tax-Aide location. Extention Research your tax questions. Extention Search publications and instructions by topic or keyword. Extention Read the Internal Revenue Code, regulations, or other official guidance. Extention Read Internal Revenue Bulletins. Extention Sign up to receive local and national tax news by email. Extention Phone. Extention You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Extention   Call the Business and Specialty Tax line for questions at 1-800-829-4933. Extention Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Extention Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Extention Call to locate the nearest volunteer help site, 1-800-906-9887. Extention Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Extention The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Extention Most VITA and TCE sites offer free electronic filing. Extention Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Extention Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Extention Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Extention You should receive your order within 10 business days. Extention Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Extention Follow the prompts to provide your Employer Identification Number, street address and ZIP code. Extention Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Extention Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Extention The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Extention These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Extention gsa. Extention gov/fedrelay. Extention Walk-in. Extention You can find a selection of forms, publications and services — in-person, face-to-face. Extention   Products. Extention You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Extention Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Extention Services. Extention You can walk in to your local TAC most business days for personal, face-to-face tax help. Extention An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Extention If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Extention No appointment is necessary—just walk in. Extention Before visiting, check www. Extention irs. Extention gov/localcontacts for hours of operation and services provided. Extention Mail. Extention You can send your order for forms, instructions, and publications to the address below. Extention You should receive a response within 10 days after your request is received. Extention  Internal Revenue Service 1201 N. Extention Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Extention   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Extention Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Extention What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Extention We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Extention You face (or your business is facing) an immediate threat of adverse action. Extention You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Extention   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Extention Here's why we can help: TAS is an independent organization within the IRS. Extention Our advocates know how to work with the IRS. Extention Our services are free and tailored to meet your needs. Extention We have offices in every state, the District of Columbia, and Puerto Rico. Extention How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Extention irs. Extention gov/advocate, or call us toll-free at 1-877-777-4778. Extention How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Extention If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Extention irs. Extention gov/sams. Extention Low Income Taxpayer Clinics. Extention   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Extention Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Extention Visit www. Extention TaxpayerAdvocate. Extention irs. Extention gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Extention Small Business and Self-Employed Tax Center. Extention This online guide is a must for every small business owner or any taxpayer about to start a business. Extention  The information is updated during the year. Extention Visit www. Extention irs. Extention gov/Businesses/Small-Businesses-&-Self-Employed. Extention Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Washington Office of the Attorney General

Website: Washington Office of the Attorney General

Address: Washington Office of the Attorney General
Consumer Protection Division
PO Box 40100
1125 Washington St., SE
Olympia, WA 98504-0100

Phone Number: 206-464-6684

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

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Regional Consumer Protection Offices

Tacoma Office of the Attorney General

Website: Tacoma Office of the Attorney General

Address: Tacoma Office of the Attorney General
Consumer Protection Division
1250 Pacific Ave., Suite 105
Tacoma, WA 98402

Phone Number: 253-593-5243

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

Vancouver Office of the Attorney General

Website: Vancouver Office of the Attorney General

Address: Vancouver Office of the Attorney General
Consumer Protection Division
1220 Main St., Suite 510
Vancouver, WA 98660

Phone Number: 360-759-2100

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

Bellingham Office of the Attorney General

Website: Bellingham Office of the Attorney General

Address: Bellingham Office of the Attorney General
Consumer Protection Division
103 E. Holly St., Suite 310
Bellingham, WA 98225

Phone Number: 360-676-2037

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

Seattle Office of the Attorney General

Website: Seattle Office of the Attorney General

Address: Seattle Office of the Attorney General
Consumer Protection Division
800 5th Ave., Suite 2000
Seattle, WA 98104

Phone Number: 206-464-7744

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

Spokane Office of the Attorney General

Website: Spokane Office of the Attorney General

Address: Spokane Office of the Attorney General
Consumer Protection Division (Eastern Washington)
1116 W. Riverside Ave.
Spokane, WA 99201-1194

Phone Number: 509-456-3123

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

Kennewick Office of the Attorney General

Website: Kennewick Office of the Attorney General

Address: Kennewick Office of the Attorney General
Consumer Protection Division
8127 W. Klamath Ct.
Kennewick, WA 99336-2607

Phone Number: 509-734-7285

Toll-free: 1-800-551-4636 (WA)

TTY: 1-800-833-6388

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
Division of Banks
PO Box 41200
Olympia, WA 98504-1200

Phone Number: 360-902-8704

Toll-free: 1-877-746-4334
1-888-976-4422 (in Spanish) 1-888-976-4422 (in Spanish)

TTY: 360-664-8126

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Office of the Insurance Commissioner

Website: Office of the Insurance Commissioner

Address: Office of the Insurance Commissioner
Consumer Protection
PO Box 40256
Olympia, WA 98504-0256

Phone Number: 360-725-7080

Toll-free: 1-800-562-6900 (WA)

TTY: 360-586-0241

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
Division of Securities
PO Box 9033
Olympia, WA 98507-9033

Phone Number: 360-902-8760

Toll-free: 1-877-746-4334

TTY: 360-664-8126

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Utilities and Transportation Commission

Website: Utilities and Transportation Commission

Address: Utilities and Transportation Commission
Consumer Protection
PO Box 47250
Olympia, WA 98504

Phone Number: 360-664-1160

Toll-free: 1-888-333-9882

TTY: 1-800-416-5289

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The Extention

Extention 11. Extention   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Extention Kickbacks. Extention Form 1099-MISC. Extention Exception. Extention Tax preparation fees. Extention Covered executive branch official. Extention Exceptions to denial of deduction. Extention Indirect political contributions. Extention Type of deduction. Extention Repayment—$3,000 or less. Extention Repayment—over $3,000. Extention Method 1. Extention Method 2. Extention Repayment does not apply. Extention Year of deduction (or credit). Extention Telephone. Extention What's New Standard mileage rate. Extention  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Extention 5 cents per mile. Extention For more information, see Car and truck expenses under Miscellaneous Expenses. Extention Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Extention Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Extention Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Extention If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Extention To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Extention Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Extention For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Extention Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Extention If the expenses are substantiated, you can deduct the allowable amount on your tax return. Extention Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Extention For example, you can deduct 100% of the cost of meals on your business books and records. Extention However, only 50% of these costs are allowed by law as a tax deduction. Extention How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Extention If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Extention If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Extention If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Extention See Table 11-1 , Reporting Reimbursements. Extention Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Extention Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Extention An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Extention The advance is reasonably calculated not to exceed the amount of anticipated expenses. Extention You make the advance within a reasonable period of time of your employee paying or incurring the expense. Extention If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Extention Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Extention Adequate accounting. Extention   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Extention They must give you documentary evidence of their travel, mileage, and other employee business expenses. Extention This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Extention Excess reimbursement or allowance. Extention   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Extention The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Extention Reasonable period of time. Extention   A reasonable period of time depends on the facts and circumstances. Extention Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Extention You give an advance within 30 days of the time the employee pays or incurs the expense. Extention Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Extention Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Extention You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Extention How to deduct. Extention   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Extention Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Extention If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Extention   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Extention S. Extention Corporation Income Tax Return. Extention If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Extention Table 11-1. Extention Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Extention Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Extention Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Extention Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Extention The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Extention Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Extention The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Extention A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Extention No reimbursement plan The entire amount as wages in box 1. Extention Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Extention In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Extention Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Extention Federal rate. Extention   The federal rate can be figured using any one of the following methods. Extention For car expenses: The standard mileage rate. Extention A fixed and variable rate (FAVR). Extention For per diem amounts: The regular federal per diem rate. Extention The standard meal allowance. Extention The high-low rate. Extention Car allowance. Extention   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Extention Beginning in 2013, the standard business mileage rate is 56. Extention 5 cents per mile. Extention   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Extention This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Extention ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Extention ). Extention For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Extention irs. Extention gov/irb/2010-51_IRB/ar14. Extention html and Notice 2012-72, available at www. Extention irs. Extention gov/irb/2012-50_IRB/ar10. Extention html. Extention Per diem allowance. Extention   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Extention Regular federal per diem rate. Extention   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Extention It has two components: Lodging expense, and Meal and incidental expense (M&IE). Extention The rates are different for different locations. Extention Publication 1542 lists the rates in the continental United States. Extention Standard meal allowance. Extention   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Extention You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Extention Internet access. Extention    Per diem rates are available on the Internet. Extention You can access per diem rates at www. Extention gsa. Extention gov/perdiemrates. Extention High-low method. Extention   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Extention It eliminates the need to keep a current list of the per diem rate for each city. Extention   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Extention All other areas have a per diem amount of $163 ($52 for M&IE). Extention The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Extention   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Extention The rate for all other locations increased to $170 ($52 for M&IE). Extention For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Extention However, you must use the same rate for all employees reimbursed under the high-low method. Extention   For more information about the high-low method, see Notice 2013-65, available at www. Extention irs. Extention gov/irb/2013-44_IRB/ar13. Extention html. Extention See Publication 1542 (available on the Internet at IRS. Extention gov) for the current per diem rates for all locations. Extention Reporting per diem and car allowances. Extention   The following discussion explains how to report per diem and car allowances. Extention The manner in which you report them depends on how the allowance compares to the federal rate. Extention See Table 11-1. Extention Allowance less than or equal to the federal rate. Extention   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Extention Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Extention See How to deduct under Accountable Plans, earlier. Extention Allowance more than the federal rate. Extention   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Extention   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Extention Deduct it as travel expenses (as explained above). Extention This part of the allowance is treated as reimbursed under an accountable plan. Extention   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Extention Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Extention This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Extention Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Extention The deduction limit applies even if you reimburse them for 100% of the expenses. Extention Application of the 50% limit. Extention   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Extention It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Extention The deduction limit may also apply to meals you furnish on your premises to your employees. Extention Related expenses. Extention   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Extention Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Extention However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Extention Amount subject to 50% limit. Extention   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Extention The per diem allowance. Extention The federal rate for M&IE. Extention   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Extention If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Extention Meal expenses when subject to “hours of service” limits. Extention   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Extention   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Extention De minimis (minimal) fringe benefit. Extention   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Extention See Publication 15-B for additional information on de minimis fringe benefits. Extention Company cafeteria or executive dining room. Extention   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Extention This includes the cost of maintaining the facilities for providing the food and beverages. Extention These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Extention Employee activities. Extention   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Extention The benefit must be primarily for your employees who are not highly compensated. Extention   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Extention Owned a 10% or more interest in the business during the year or the preceding year. Extention An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Extention Received more than $115,000 in pay for the preceding year. Extention You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Extention   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Extention Meals or entertainment treated as compensation. Extention   The 50% limit does not apply to either of the following. Extention Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Extention Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Extention Sales of meals or entertainment. Extention   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Extention For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Extention The 50% limit does not apply to this expense. Extention Providing meals or entertainment to general public to promote goodwill. Extention   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Extention The 50% limit does not apply to this expense. Extention Director, stockholder, or employee meetings. Extention   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Extention You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Extention These expenses are subject to the 50% limit. Extention Trade association meetings. Extention   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Extention These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Extention Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Extention All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Extention The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Extention You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Extention Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Extention Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Extention Advertising expenses. Extention   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Extention Generally, you cannot deduct amounts paid to influence legislation (i. Extention e. Extention , lobbying). Extention See Lobbying expenses , later. Extention   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Extention For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Extention S. Extention Savings Bonds, or to participate in similar causes is usually deductible. Extention Anticipated liabilities. Extention   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Extention For example, assume you sold 1-year TV service contracts this year totaling $50,000. Extention From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Extention You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Extention You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Extention Bribes and kickbacks. Extention   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Extention Such activity could result in criminal prosecution. Extention Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Extention   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Extention Meaning of “generally enforced. Extention ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Extention For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Extention Kickbacks. Extention   A kickback is a payment for referring a client, patient, or customer. Extention The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Extention In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Extention   For example, the Yard Corporation is in the business of repairing ships. Extention It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Extention Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Extention These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Extention Form 1099-MISC. Extention   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Extention See Form 1099-MISC for more information. Extention Car and truck expenses. Extention   The costs of operating a car, truck, or other vehicle in your business are deductible. Extention For more information on how to figure your deduction, see Publication 463. Extention Charitable contributions. Extention   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Extention If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Extention However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Extention See the Instructions for Form 1120 for more information. Extention Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Extention Example. Extention You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Extention The purpose of the ad was to encourage readers to buy your products. Extention Your payment is not a charitable contribution. Extention You can deduct it as an advertising expense. Extention Example. Extention You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Extention Your payment is not a charitable contribution. Extention You can deduct it as a business expense. Extention See Publication 526 for a discussion of donated inventory, including capital gain property. Extention Club dues and membership fees. Extention   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Extention This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Extention Exception. Extention   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Extention Boards of trade. Extention Business leagues. Extention Chambers of commerce. Extention Civic or public service organizations. Extention Professional organizations such as bar associations and medical associations. Extention Real estate boards. Extention Trade associations. Extention Credit card convenience fees. Extention   Credit card companies charge a fee to businesses who accept their cards. Extention This fee when paid or incurred by the business can be deducted as a business expense. Extention Damages recovered. Extention   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Extention You must include this compensation in your income. Extention However, you may be able to take a special deduction. Extention The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Extention The deduction is the smaller of the following. Extention The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Extention Your losses from the injury you have not deducted. Extention Demolition expenses or losses. Extention   Amounts paid or incurred to demolish a structure are not deductible. Extention These amounts are added to the basis of the land where the demolished structure was located. Extention Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Extention Education expenses. Extention   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Extention See Education Expenses in chapter 2. Extention   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Extention You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Extention For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Extention   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Extention This is true even if the education maintains or improves skills presently required in your business. Extention For more information on education expenses, see Publication 970. Extention Franchise, trademark, trade name. Extention   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Extention   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Extention   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Extention Impairment-related expenses. Extention   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Extention   You are disabled if you have either of the following. Extention A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Extention A physical or mental impairment that substantially limits one or more of your major life activities. Extention   The expense qualifies as a business expense if all the following apply. Extention Your work clearly requires the expense for you to satisfactorily perform that work. Extention The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Extention Their treatment is not specifically provided for under other tax law provisions. Extention Example. Extention You are blind. Extention You must use a reader to do your work, both at and away from your place of work. Extention The reader's services are only for your work. Extention You can deduct your expenses for the reader as a business expense. Extention Internet-related expenses. Extention   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Extention If you are starting a business you may have to amortize these expenses as start-up costs. Extention For more information about amortizing start-up and organizational costs, see chapter 8. Extention Interview expense allowances. Extention   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Extention You can deduct the reimbursements as a business expense. Extention However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Extention Legal and professional fees. Extention   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Extention However, usually legal fees you pay to acquire business assets are not deductible. Extention These costs are added to the basis of the property. Extention   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Extention If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Extention The result is the portion of the invoice attributable to business expenses. Extention The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Extention   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Extention However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Extention See Publication 529, Miscellaneous Deductions. Extention Tax preparation fees. Extention   The cost of hiring a tax professional, such as a C. Extention P. Extention A. Extention , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Extention Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Extention   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Extention Licenses and regulatory fees. Extention   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Extention Some licenses and fees may have to be amortized. Extention See chapter 8 for more information. Extention Lobbying expenses. Extention   Generally, lobbying expenses are not deductible. Extention Lobbying expenses include amounts paid or incurred for any of the following activities. Extention Influencing legislation. Extention Participating in or intervening in any political campaign for, or against, any candidate for public office. Extention Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Extention Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Extention Researching, preparing, planning, or coordinating any of the preceding activities. Extention   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Extention For information on making this allocation, see section 1. Extention 162-28 of the regulations. Extention   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Extention The organization conducts lobbying activities on matters of direct financial interest to your business. Extention A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Extention   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Extention Covered executive branch official. Extention   For purposes of this discussion, a covered executive branch official is any of the following. Extention The President. Extention The Vice President. Extention Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Extention Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Extention Exceptions to denial of deduction. Extention   The general denial of the deduction does not apply to the following. Extention Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Extention An Indian tribal government is treated as a local council or similar governing body. Extention Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Extention Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Extention Moving machinery. Extention   Generally, the cost of moving machinery from one city to another is a deductible expense. Extention So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Extention You can deduct the cost of installing the machinery in the new location. Extention However, you must capitalize the costs of installing or moving newly purchased machinery. Extention Outplacement services. Extention   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Extention are deductible. Extention   The costs of outplacement services may cover more than one deduction category. Extention For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Extention   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Extention Penalties and fines. Extention   Penalties paid for late performance or nonperformance of a contract are generally deductible. Extention For instance, you own and operate a construction company. Extention Under a contract, you are to finish construction of a building by a certain date. Extention Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Extention You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Extention These additional costs are deductible business expenses. Extention   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Extention These fines or penalties include the following amounts. Extention Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Extention Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Extention Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Extention Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Extention   Examples of nondeductible penalties and fines include the following. Extention Fines for violating city housing codes. Extention Fines paid by truckers for violating state maximum highway weight laws. Extention Fines for violating air quality laws. Extention Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Extention   A fine or penalty does not include any of the following. Extention Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Extention Court costs or stenographic and printing charges. Extention Compensatory damages paid to a government. Extention Political contributions. Extention   Contributions or gifts paid to political parties or candidates are not deductible. Extention In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Extention Indirect political contributions. Extention   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Extention Examples of nondeductible expenses include the following. Extention Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Extention Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Extention Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Extention Repairs. Extention   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Extention Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Extention Otherwise, the cost must be capitalized and depreciated. Extention See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Extention   The cost of repairs includes the costs of labor, supplies, and certain other items. Extention The value of your own labor is not deductible. Extention Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Extention Repayments. Extention   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Extention Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Extention Type of deduction. Extention   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Extention For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Extention If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Extention   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Extention However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Extention Repayment—$3,000 or less. Extention   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Extention Repayment—over $3,000. Extention   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Extention However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Extention ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Extention If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Extention Method 1. Extention   Figure your tax for 2013 claiming a deduction for the repaid amount. Extention Method 2. Extention   Figure your tax for 2013 claiming a credit for the repaid amount. Extention Follow these steps. Extention Figure your tax for 2013 without deducting the repaid amount. Extention Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Extention Subtract the tax in (2) from the tax shown on your return for the earlier year. Extention This is the amount of your credit. Extention Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Extention   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Extention   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Extention R. Extention C. Extention 1341” next to line 71. Extention Example. Extention For 2012, you filed a return and reported your income on the cash method. Extention In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Extention Your filing status in 2013 and 2012 is single. Extention Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Extention Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Extention Repayment does not apply. Extention   This discussion does not apply to the following. Extention Deductions for bad debts. Extention Deductions from sales to customers, such as returns and allowances, and similar items. Extention Deductions for legal and other expenses of contesting the repayment. Extention Year of deduction (or credit). Extention   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Extention If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Extention For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Extention Subscriptions. Extention   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Extention Supplies and materials. Extention   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Extention   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Extention You do not keep a record of when they are used. Extention You do not take an inventory of the amount on hand at the beginning and end of the tax year. Extention This method does not distort your income. Extention   You can also deduct the cost of books, professional instruments, equipment, etc. Extention , if you normally use them within a year. Extention However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Extention For more information regarding depreciation see Publication 946, How To Depreciate Property. Extention Utilities. Extention   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Extention However, any part due to personal use is not deductible. Extention Telephone. Extention   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Extention However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Extention Prev  Up  Next   Home   More Online Publications