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File Taxes Online Free 2012

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File Taxes Online Free 2012

File taxes online free 2012 1. File taxes online free 2012   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. File taxes online free 2012 General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. File taxes online free 2012 There are exceptions to this rule, discussed under Exceptions , later. File taxes online free 2012 Generally, you must include the canceled debt in your income. File taxes online free 2012 However, you may be able to exclude the canceled debt. File taxes online free 2012 See Exclusions , later. File taxes online free 2012 Example. File taxes online free 2012 John owed $1,000 to Mary. File taxes online free 2012 Mary agreed to accept and John paid $400 in satisfaction of the entire debt. File taxes online free 2012 John has canceled debt of $600. File taxes online free 2012 Example. File taxes online free 2012 Margaret owed $1,000 to Henry. File taxes online free 2012 Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. File taxes online free 2012 Margaret does not have canceled debt. File taxes online free 2012 Instead, she has income from services. File taxes online free 2012 A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. File taxes online free 2012 Debt for which you are personally liable is recourse debt. File taxes online free 2012 All other debt is nonrecourse debt. File taxes online free 2012 If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. File taxes online free 2012 See Discounts and loan modifications , later. File taxes online free 2012 However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. File taxes online free 2012 As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. File taxes online free 2012 For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. File taxes online free 2012 There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. File taxes online free 2012 See Exceptions and Exclusions, later. File taxes online free 2012 You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. File taxes online free 2012 Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. File taxes online free 2012 The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. File taxes online free 2012 For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. File taxes online free 2012 Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. File taxes online free 2012 An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. File taxes online free 2012 Identifiable event codes. File taxes online free 2012    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. File taxes online free 2012 The codes shown in box 6 are explained below. File taxes online free 2012 Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. File taxes online free 2012 Note. File taxes online free 2012 Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. File taxes online free 2012 However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. File taxes online free 2012 Code A — Bankruptcy. File taxes online free 2012 Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. File taxes online free 2012 See Bankruptcy , later. File taxes online free 2012 Code B — Other judicial debt relief. File taxes online free 2012 Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. File taxes online free 2012 Code C — Statute of limitations or expiration of deficiency period. File taxes online free 2012 Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. File taxes online free 2012 In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. File taxes online free 2012 Code D — Foreclosure election. File taxes online free 2012 Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. File taxes online free 2012 This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. File taxes online free 2012 Code E — Debt relief from probate or similar proceeding. File taxes online free 2012 Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. File taxes online free 2012 Code F — By agreement. File taxes online free 2012 Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. File taxes online free 2012 Code G — Decision or policy to discontinue collection. File taxes online free 2012 Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. File taxes online free 2012 For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. File taxes online free 2012 Code H — Expiration of nonpayment testing period. File taxes online free 2012 Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. File taxes online free 2012 The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. File taxes online free 2012 This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. File taxes online free 2012 Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. File taxes online free 2012 Code I — Other actual discharge before identifiable event. File taxes online free 2012 Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. File taxes online free 2012 Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. File taxes online free 2012 Amount of canceled debt. File taxes online free 2012    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. File taxes online free 2012 The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). File taxes online free 2012 Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. File taxes online free 2012 Interest included in canceled debt. File taxes online free 2012    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. File taxes online free 2012 Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. File taxes online free 2012 See Deductible Debt under Exceptions, later. File taxes online free 2012 Persons who each receive a Form 1099-C showing the full amount of debt. File taxes online free 2012    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. File taxes online free 2012 However, you may not have to report that entire amount as income. File taxes online free 2012 The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. File taxes online free 2012 See Example 3 under Insolvency, later. File taxes online free 2012 Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. File taxes online free 2012 However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. File taxes online free 2012 The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. File taxes online free 2012 For more details, see Exceptions and Exclusions, later. File taxes online free 2012 Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. File taxes online free 2012   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. File taxes online free 2012 The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. File taxes online free 2012 The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. File taxes online free 2012 If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. File taxes online free 2012 The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. File taxes online free 2012 For more details, see Exceptions and Exclusions, later. File taxes online free 2012 Nonrecourse debt. File taxes online free 2012   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. File taxes online free 2012 The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. File taxes online free 2012 The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. File taxes online free 2012 The character of the gain or loss is determined by the character of the property. File taxes online free 2012 More information. File taxes online free 2012    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. File taxes online free 2012 Abandonments Recourse debt. File taxes online free 2012   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. File taxes online free 2012 You must report this income on your tax return unless one of the exceptions or exclusions described later applies. File taxes online free 2012 For more details, see Exceptions and Exclusions, later. File taxes online free 2012 This income is separate from any amount realized from the abandonment of the property. File taxes online free 2012 For more details, see chapter 3. File taxes online free 2012 Nonrecourse debt. File taxes online free 2012   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. File taxes online free 2012 Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. File taxes online free 2012 For more information, see Publication 542, Corporations. File taxes online free 2012 Prev  Up  Next   Home   More Online Publications
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LP 68 Frequently Asked Questions (FAQs)

What is the notice telling me?

We have released the Notice of Levy sent to you previously regarding the taxpayer named in the letter.

What do I have to do?

You are no longer required to turn over any money, property, or rights to property belonging to this taxpayer.

How much time do I have?

The levy release is effective immediately upon receipt by you. No other action is required on your part.

Who should I contact?

There is no need to contact us regarding the release. You may inform the taxpayer that you received the release of levy.

Page Last Reviewed or Updated: 30-Jan-2014

The File Taxes Online Free 2012

File taxes online free 2012 5. File taxes online free 2012   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. File taxes online free 2012 Making the election. File taxes online free 2012 Form 3115. File taxes online free 2012 Income TaxesAccrual of contested income taxes. File taxes online free 2012 Employment Taxes Other TaxesAdditional Medicare Tax. File taxes online free 2012 What's New Additional Medicare Tax. File taxes online free 2012  Beginning in 2013, you must withhold a 0. File taxes online free 2012 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. File taxes online free 2012 Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. File taxes online free 2012 See Employment Taxes , and Self-employment tax , later. File taxes online free 2012 Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. File taxes online free 2012 You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. File taxes online free 2012 Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. File taxes online free 2012 When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. File taxes online free 2012 This applies whether you use the cash method or an accrual method of accounting. File taxes online free 2012 Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. File taxes online free 2012 You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . File taxes online free 2012 Limit on accrual of taxes. File taxes online free 2012   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. File taxes online free 2012 However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. File taxes online free 2012 Example. File taxes online free 2012 Your state imposes a tax on personal property used in a trade or business conducted in the state. File taxes online free 2012 This tax is assessed and becomes a lien as of July 1 (accrual date). File taxes online free 2012 In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. File taxes online free 2012 Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. File taxes online free 2012 You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. File taxes online free 2012 Uniform capitalization rules. File taxes online free 2012   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. File taxes online free 2012 They also apply to certain taxpayers who acquire property for resale. File taxes online free 2012 Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. File taxes online free 2012 For more information, see chapter 1. File taxes online free 2012 Carrying charges. File taxes online free 2012   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. File taxes online free 2012 You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. File taxes online free 2012 For more information, see chapter 7. File taxes online free 2012 Refunds of taxes. File taxes online free 2012   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. File taxes online free 2012 For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. File taxes online free 2012    You must include in income any interest you receive on tax refunds. File taxes online free 2012 Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. File taxes online free 2012 The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. File taxes online free 2012 Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. File taxes online free 2012 See Taxes for local benefits , later. File taxes online free 2012 If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. File taxes online free 2012 However, you can elect to ratably accrue the taxes during the year. File taxes online free 2012 See Electing to ratably accrue , later. File taxes online free 2012 Taxes for local benefits. File taxes online free 2012   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. File taxes online free 2012 These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. File taxes online free 2012 You should increase the basis of your property by the amount of the assessment. File taxes online free 2012   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. File taxes online free 2012 If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. File taxes online free 2012 Example. File taxes online free 2012 To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. File taxes online free 2012 The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. File taxes online free 2012 The city is paying the principal and interest with the annual payments made by the property owners. File taxes online free 2012 The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. File taxes online free 2012 The part of the payments used to pay the interest charges on the bonds is deductible as taxes. File taxes online free 2012 Charges for services. File taxes online free 2012   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. File taxes online free 2012 Purchase or sale of real estate. File taxes online free 2012   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. File taxes online free 2012   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. File taxes online free 2012 Treat the seller as paying the taxes up to but not including the date of sale. File taxes online free 2012 Treat the buyer as paying the taxes beginning with the date of sale. File taxes online free 2012 You can usually find this information on the settlement statement you received at closing. File taxes online free 2012   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. File taxes online free 2012 Example. File taxes online free 2012 Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. File taxes online free 2012 He has not elected to ratably accrue property taxes. File taxes online free 2012 November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. File taxes online free 2012 He sold the property on June 30, 2013. File taxes online free 2012 Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. File taxes online free 2012 He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. File taxes online free 2012 Electing to ratably accrue. File taxes online free 2012   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. File taxes online free 2012 Example. File taxes online free 2012 Juan Sanchez is a calendar year taxpayer who uses an accrual method. File taxes online free 2012 His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. File taxes online free 2012 July 1 is the assessment and lien date. File taxes online free 2012 If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. File taxes online free 2012 Separate elections. File taxes online free 2012   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. File taxes online free 2012 Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. File taxes online free 2012 See Form 3115 , later. File taxes online free 2012 Making the election. File taxes online free 2012   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. File taxes online free 2012 The statement should show all the following items. File taxes online free 2012 The trades or businesses to which the election applies and the accounting method or methods used. File taxes online free 2012 The period to which the taxes relate. File taxes online free 2012 The computation of the real estate tax deduction for that first year. File taxes online free 2012   Generally, you must file your return by the due date (including extensions). File taxes online free 2012 However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). File taxes online free 2012 Attach the statement to the amended return and write “Filed pursuant to section 301. File taxes online free 2012 9100-2” on the statement. File taxes online free 2012 File the amended return at the same address where you filed the original return. File taxes online free 2012 Form 3115. File taxes online free 2012    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. File taxes online free 2012 For more information, including applicable time frames for filing, see the Instructions for Form 3115. File taxes online free 2012 Note. File taxes online free 2012 If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. File taxes online free 2012 R. File taxes online free 2012 B. File taxes online free 2012 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. File taxes online free 2012 R. File taxes online free 2012 B. File taxes online free 2012 689, and Revenue Procedure 2012-20, 2012-14 I. File taxes online free 2012 R. File taxes online free 2012 B. File taxes online free 2012 700, or any successor. File taxes online free 2012 Revenue Procedure 2011-14 is available at  www. File taxes online free 2012 irs. File taxes online free 2012 gov/irb/2011-04IRB/ar08. File taxes online free 2012 html. File taxes online free 2012 Income Taxes This section discusses federal, state, local, and foreign income taxes. File taxes online free 2012 Federal income taxes. File taxes online free 2012   You cannot deduct federal income taxes. File taxes online free 2012 State and local income taxes. File taxes online free 2012   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. File taxes online free 2012 An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). File taxes online free 2012   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. File taxes online free 2012 Accrual of contested income taxes. File taxes online free 2012   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. File taxes online free 2012   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. File taxes online free 2012 You cannot deduct them in the year in which the liability is finally determined. File taxes online free 2012    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. File taxes online free 2012 Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. File taxes online free 2012   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. File taxes online free 2012 You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. File taxes online free 2012 For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. File taxes online free 2012 Foreign income taxes. File taxes online free 2012   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. File taxes online free 2012 S. File taxes online free 2012 possession. File taxes online free 2012 However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. File taxes online free 2012 S. File taxes online free 2012 tax under the foreign earned income exclusion or the foreign housing exclusion. File taxes online free 2012 For information on these exclusions, see Publication 54, Tax Guide for U. File taxes online free 2012 S. File taxes online free 2012 Citizens and Resident Aliens Abroad. File taxes online free 2012 For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. File taxes online free 2012 Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. File taxes online free 2012 Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. File taxes online free 2012 You may also need to pay certain employment taxes from your own funds. File taxes online free 2012 These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. File taxes online free 2012 Note. File taxes online free 2012 Additional Medicare Tax is only imposed on the employee. File taxes online free 2012 There is no employer share of Additional Medicare Tax. File taxes online free 2012 Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. File taxes online free 2012 You can deduct the employment taxes you must pay from your own funds as taxes. File taxes online free 2012 Example. File taxes online free 2012 You pay your employee $18,000 a year. File taxes online free 2012 However, after you withhold various taxes, your employee receives $14,500. File taxes online free 2012 You also pay an additional $1,500 in employment taxes. File taxes online free 2012 You should deduct the full $18,000 as wages. File taxes online free 2012 You can deduct the $1,500 you pay from your own funds as taxes. File taxes online free 2012 For more information on employment taxes, see Publication 15 (Circular E). File taxes online free 2012 Unemployment fund taxes. File taxes online free 2012   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. File taxes online free 2012 Deduct these payments as taxes. File taxes online free 2012 Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. File taxes online free 2012 Excise taxes. File taxes online free 2012   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. File taxes online free 2012 However, see Fuel taxes , later. File taxes online free 2012   For more information on excise taxes, see Publication 510. File taxes online free 2012 Franchise taxes. File taxes online free 2012   You can deduct corporate franchise taxes as a business expense. File taxes online free 2012 Fuel taxes. File taxes online free 2012   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. File taxes online free 2012 Do not deduct these taxes as a separate item. File taxes online free 2012   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. File taxes online free 2012 For more information, see Publication 510. File taxes online free 2012 Occupational taxes. File taxes online free 2012   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. File taxes online free 2012 Personal property tax. File taxes online free 2012   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. File taxes online free 2012 Sales tax. File taxes online free 2012   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. File taxes online free 2012 If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. File taxes online free 2012 If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. File taxes online free 2012 If the property is depreciable, add the sales tax to the basis for depreciation. File taxes online free 2012 For more information on basis, see Publication 551. File taxes online free 2012    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. File taxes online free 2012 Also, do not include these taxes in gross receipts or sales. File taxes online free 2012 Self-employment tax. File taxes online free 2012   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. File taxes online free 2012 This deduction only affects your income tax. File taxes online free 2012 It does not affect your net earnings from self-employment or your self-employment tax. File taxes online free 2012   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). File taxes online free 2012   For more information on self-employment tax, see Publication 334. File taxes online free 2012 Additional Medicare Tax. File taxes online free 2012   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. File taxes online free 2012 See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. File taxes online free 2012 Prev  Up  Next   Home   More Online Publications