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Free Federal And State Tax Filing

Free federal and state tax filing Index A Absence, temporary, Temporary absence from work. Free federal and state tax filing , Temporary absence from work. Free federal and state tax filing Accountable plans, Accountable Plans Address, change of, Reminders Adequate accounting, Adequate accounting. Free federal and state tax filing Armed Forces, Retirees, survivors, and Armed Forces members. Free federal and state tax filing , Members of the Armed Forces Distance test, special rule, Armed Forces. Free federal and state tax filing Form 3903, how to complete, How to complete Form 3903 for members of the Armed Forces. Free federal and state tax filing Services or reimbursements provided by government, Services or reimbursements provided by government. Free federal and state tax filing Spouse and dependents, Spouse and dependents. Free federal and state tax filing Assistance (see Tax help) C Change of address, Reminders Closely related in place, Closely related in place. Free federal and state tax filing Closely related in time, Closely related in time. Free federal and state tax filing D Deductible moving expenses, Deductible Moving Expenses, Moving expenses allocable to excluded foreign income. Free federal and state tax filing Household goods, Household goods and personal effects. Free federal and state tax filing Moving to and from storage, Moving goods and effects to and from storage. Free federal and state tax filing Member of your household, Member of your household. Free federal and state tax filing Moves in U. Free federal and state tax filing S. Free federal and state tax filing , Moves to Locations in the United States Moves outside U. Free federal and state tax filing S. Free federal and state tax filing , Moves to Locations Outside the United States Moving expenses allocable to excluded foreign income, Moving expenses allocable to excluded foreign income. Free federal and state tax filing Personal effects, Household goods and personal effects. Free federal and state tax filing Moving to and from storage, Moving goods and effects to and from storage. Free federal and state tax filing Reasonable expenses, Reasonable expenses. Free federal and state tax filing Storage expenses, Storage expenses. Free federal and state tax filing , Storage expenses. Free federal and state tax filing Travel by car, Travel by car. Free federal and state tax filing Travel expenses, Travel expenses. Free federal and state tax filing Distance test, Distance Test Armed Forces, special rule, Armed Forces. Free federal and state tax filing First job, First job or return to full-time work. Free federal and state tax filing Illustration of (Figure A), Main job location, Main job location. Free federal and state tax filing Return to full-time work, First job or return to full-time work. Free federal and state tax filing Worksheet 1, Distance Test E Employees Time test for, Time Test for Employees Estimated tax, Tax Withholding and Estimated Tax, Estimated tax. Free federal and state tax filing Excess reimbursements, Excess reimbursement. Free federal and state tax filing Excluded foreign income Moving expenses allocable to, Moving expenses allocable to excluded foreign income. Free federal and state tax filing F Figures (see Tables and figures) First job, First job or return to full-time work. Free federal and state tax filing Form 1040 Moving expense deduction, Where to deduct. Free federal and state tax filing Form 3903 Armed Forces members, how to complete, How to complete Form 3903 for members of the Armed Forces. Free federal and state tax filing Completing form, Completing Form 3903. Free federal and state tax filing Moving expense deduction calculation, Form 3903 Form W-2 Reimbursements, You meet accountable plan rules. Free federal and state tax filing , Expenses deducted in earlier year. Free federal and state tax filing Government provided for Armed Forces members, Services or reimbursements provided by government. Free federal and state tax filing Form W-4 Withholding allowance, Amount of income tax withheld. Free federal and state tax filing Free tax services, Free help with your tax return. Free federal and state tax filing Full-time work, defined, Full-time work. Free federal and state tax filing H Help (see Tax help) Home, defined, Home defined. Free federal and state tax filing Household goods, Household goods and personal effects. Free federal and state tax filing Moving to and from storage, Moving goods and effects to and from storage. Free federal and state tax filing I Important reminders, Reminders J Joint returns, Joint Return M Main job location Defined, Main job location. Free federal and state tax filing More than one job, More than one job. Free federal and state tax filing Union members, Union members. Free federal and state tax filing Member of household, Member of your household. Free federal and state tax filing Members of Armed Forces (see Armed Forces) Mileage rate, What's New Missing children, photographs of, Reminders Moves In U. Free federal and state tax filing S. Free federal and state tax filing , Moves to Locations in the United States Outside U. Free federal and state tax filing S. Free federal and state tax filing , Moves to Locations Outside the United States To and from storage, Moving goods and effects to and from storage. Free federal and state tax filing Moving expenses, Who Can Deduct Moving Expenses, Deductible Moving Expenses (see also Deductible moving expenses) (see also Who can deduct) N Nonaccountable plans, Nonaccountable Plans Nondeductible expenses, Nondeductible Expenses Reimbursements of, Reimbursement of nondeductible expenses. Free federal and state tax filing , Reimbursement for deductible and nondeductible expenses. Free federal and state tax filing P Permanently retired, defined, Retirees who were working abroad. Free federal and state tax filing Personal effects, Household goods and personal effects. Free federal and state tax filing Moving to and from storage, Moving goods and effects to and from storage. Free federal and state tax filing Publications (see Tax help) R Reasonable expenses, Reasonable expenses. Free federal and state tax filing Reasonable period of time, Reasonable period of time. Free federal and state tax filing Reimbursements, Reimbursements, Estimated tax. Free federal and state tax filing Accountable plans, Accountable Plans Adequate accounting, Adequate accounting. Free federal and state tax filing Armed Forces members, Services or reimbursements provided by government. Free federal and state tax filing Estimated tax, Estimated tax. Free federal and state tax filing Excess, Excess reimbursement. Free federal and state tax filing Excluded from income, Reimbursements excluded from income. Free federal and state tax filing Included in income, Reimbursements included in income. Free federal and state tax filing Nonaccountable plans, Nonaccountable Plans Nondeductible expenses, Reimbursement of nondeductible expenses. Free federal and state tax filing , Reimbursement for deductible and nondeductible expenses. Free federal and state tax filing Reasonable period of time, Reasonable period of time. Free federal and state tax filing Reporting moving expenses and reimbursements (Table 2), How and When To Report Types of plans, Types of Reimbursement Plans Reporting expenses, How and When To Report Expenses equal to or less than reimbursement, Expenses equal to or less than reimbursement. Free federal and state tax filing Expenses greater than reimbursement, Expenses greater than reimbursement. Free federal and state tax filing Form 3903, deduction calculation, Form 3903 Moving expenses and reimbursements (Table 2), How and When To Report Retirees who move to U. Free federal and state tax filing S. Free federal and state tax filing , Retirees, survivors, and Armed Forces members. Free federal and state tax filing , Retirees or survivors. Free federal and state tax filing Permanently retired, defined, Retirees who were working abroad. Free federal and state tax filing Return to full-time work, First job or return to full-time work. Free federal and state tax filing S Seasonal trade or business, Seasonal trade or business. Free federal and state tax filing Seasonal work, Seasonal work. Free federal and state tax filing Self-employed persons Time test, Time Test for Self-Employed Persons, Self-employment. Free federal and state tax filing Table 1, Time Test for Employees Spouse of Armed Forces member, Spouse and dependents. Free federal and state tax filing Standard mileage rate, What's New Storage expenses, Storage expenses. Free federal and state tax filing , Storage expenses. Free federal and state tax filing Survivors who move to U. Free federal and state tax filing S. Free federal and state tax filing , Retirees, survivors, and Armed Forces members. Free federal and state tax filing , Retirees or survivors. Free federal and state tax filing , Retirees or Survivors Who Move to the United States, Survivors of decedents who were working abroad. Free federal and state tax filing When move begins, When a move begins. Free federal and state tax filing T Tables and figures Distance test, Distance Test Nonmilitary move within U. Free federal and state tax filing S. Free federal and state tax filing , can you deduct expenses (Figure B), Seasonal work. Free federal and state tax filing Reporting moving expenses and reimbursements (Table 2), How and When To Report Time test, satisfying for employees and self-employed persons (Table 1), Time Test for Employees Tax help, How To Get Tax Help Temporary absence, Temporary absence from work. Free federal and state tax filing , Temporary absence from work. Free federal and state tax filing Time test, Time Test Employees, Time Test for Employees Exceptions to, Exceptions to the Time Test Full-time work, Full-time work. Free federal and state tax filing Joint return, Joint Return Not yet met, Time Test Not Yet Met Satisfying for employees and self-employed persons (Table 1), Time Test for Employees Seasonal trade or business, Seasonal trade or business. Free federal and state tax filing Seasonal work, Seasonal work. Free federal and state tax filing Self-employed persons, Time Test for Self-Employed Persons, Self-employment. Free federal and state tax filing Temporary absence from work, Temporary absence from work. Free federal and state tax filing , Temporary absence from work. Free federal and state tax filing Travel by car, Travel by car. Free federal and state tax filing Travel expenses, Travel expenses. Free federal and state tax filing TTY/TDD information, How To Get Tax Help U Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 Unions Main job location of member, Union members. Free federal and state tax filing W When to deduct expenses, When To Deduct Expenses, Illustrated Example Choosing when to deduct, Choosing when to deduct. Free federal and state tax filing Expenses not reimbursed, Expenses not reimbursed. Free federal and state tax filing Expenses reimbursed, Expenses reimbursed. Free federal and state tax filing How to make choice, How to make the choice. Free federal and state tax filing Who can deduct, Who Can Deduct Moving Expenses, When a move begins. Free federal and state tax filing Armed Forces, members of, Retirees, survivors, and Armed Forces members. Free federal and state tax filing Distance test, Distance Test Nonmilitary move within U. Free federal and state tax filing S. Free federal and state tax filing (Figure B), Seasonal work. Free federal and state tax filing Related to start of work, Move Related to Start of Work Retirees who move to U. Free federal and state tax filing S. Free federal and state tax filing , Retirees, survivors, and Armed Forces members. Free federal and state tax filing , Retirees or survivors. Free federal and state tax filing , Retirees or Survivors Who Move to the United States Survivors who move to U. Free federal and state tax filing S. Free federal and state tax filing , Retirees, survivors, and Armed Forces members. Free federal and state tax filing , Retirees or survivors. Free federal and state tax filing , Retirees or Survivors Who Move to the United States, Survivors of decedents who were working abroad. Free federal and state tax filing Time test, Time Test Withholding, Tax Withholding and Estimated Tax Worksheet Distance test (Worksheet 1), Distance Test Prev  Up     Home   More Online Publications
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The Free Federal And State Tax Filing

Free federal and state tax filing 2. Free federal and state tax filing   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. Free federal and state tax filing Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. Free federal and state tax filing Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. Free federal and state tax filing Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. Free federal and state tax filing The annual accounting period for your income tax return is called a tax year. Free federal and state tax filing You can use one of the following tax years. Free federal and state tax filing A calendar tax year. Free federal and state tax filing A fiscal tax year. Free federal and state tax filing Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Free federal and state tax filing A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Free federal and state tax filing Calendar tax year. Free federal and state tax filing   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Free federal and state tax filing   You must adopt the calendar tax year if any of the following apply. Free federal and state tax filing You do not keep books. Free federal and state tax filing You have no annual accounting period. Free federal and state tax filing Your present tax year does not qualify as a fiscal year. Free federal and state tax filing Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. Free federal and state tax filing   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Free federal and state tax filing For more information, see Change in tax year, later. Free federal and state tax filing   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. Free federal and state tax filing Fiscal tax year. Free federal and state tax filing   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Free federal and state tax filing A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Free federal and state tax filing   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. Free federal and state tax filing   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. Free federal and state tax filing Change in tax year. Free federal and state tax filing   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. Free federal and state tax filing See the Instructions for Form 1128 for exceptions. Free federal and state tax filing If you qualify for an automatic approval request, a user fee is not required. Free federal and state tax filing If you do not qualify for automatic approval, a ruling must be requested. Free federal and state tax filing See the instructions for Form 1128 for information about user fees if you are requesting a ruling. Free federal and state tax filing Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Free federal and state tax filing Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. Free federal and state tax filing You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. Free federal and state tax filing After that, if you want to change your accounting method, you must generally get IRS approval. Free federal and state tax filing See Change in Accounting Method, later. Free federal and state tax filing Kinds of methods. Free federal and state tax filing   Generally, you can use any of the following accounting methods. Free federal and state tax filing Cash method. Free federal and state tax filing An accrual method. Free federal and state tax filing Special methods of accounting for certain items of income and expenses. Free federal and state tax filing Combination method using elements of two or more of the above. Free federal and state tax filing You must use the same accounting method to figure your taxable income and to keep your books. Free federal and state tax filing Also, you must use an accounting method that clearly shows your income. Free federal and state tax filing Business and personal items. Free federal and state tax filing   You can account for business and personal items under different accounting methods. Free federal and state tax filing For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Free federal and state tax filing Two or more businesses. Free federal and state tax filing   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. Free federal and state tax filing They are separate and distinct only if you maintain complete and separate books and records for each business. Free federal and state tax filing Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. Free federal and state tax filing However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. Free federal and state tax filing For more information, see Inventories, later. Free federal and state tax filing Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. Free federal and state tax filing If you receive property or services, you must include their fair market value in income. Free federal and state tax filing Example. Free federal and state tax filing On December 30, 2012, Mrs. Free federal and state tax filing Sycamore sent you a check for interior decorating services you provided to her. Free federal and state tax filing You received the check on January 2, 2013. Free federal and state tax filing You must include the amount of the check in income for 2013. Free federal and state tax filing Constructive receipt. Free federal and state tax filing   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. Free federal and state tax filing You do not need to have possession of it. Free federal and state tax filing If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Free federal and state tax filing Example. Free federal and state tax filing Interest is credited to your bank account in December 2013. Free federal and state tax filing You do not withdraw it or enter it into your passbook until 2014. Free federal and state tax filing You must include it in your gross income for 2013. Free federal and state tax filing Delaying receipt of income. Free federal and state tax filing   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Free federal and state tax filing You must report the income in the year the property is received or made available to you without restriction. Free federal and state tax filing Example. Free federal and state tax filing Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. Free federal and state tax filing She was told in December that her payment was available. Free federal and state tax filing At her request, she was not paid until January 2014. Free federal and state tax filing She must include this payment in her 2013 income because it was constructively received in 2013. Free federal and state tax filing Checks. Free federal and state tax filing   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Free federal and state tax filing Example. Free federal and state tax filing Dr. Free federal and state tax filing Redd received a check for $500 on December 31, 2013, from a patient. Free federal and state tax filing She could not deposit the check in her business account until January 2, 2014. Free federal and state tax filing She must include this fee in her income for 2013. Free federal and state tax filing Debts paid by another person or canceled. Free federal and state tax filing   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Free federal and state tax filing If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Free federal and state tax filing For more information, see Canceled Debt under Kinds of Income in chapter 5. Free federal and state tax filing Repayment of income. Free federal and state tax filing   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. Free federal and state tax filing If the amount you repay is over $3,000, a special rule applies. Free federal and state tax filing For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. Free federal and state tax filing Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. Free federal and state tax filing This includes business expenses for which you contest liability. Free federal and state tax filing However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Free federal and state tax filing Expenses paid in advance. Free federal and state tax filing   You can deduct an expense you pay in advance only in the year to which it applies. Free federal and state tax filing Example. Free federal and state tax filing You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. Free federal and state tax filing You can deduct $500 in 2013 and $500 in 2014. Free federal and state tax filing Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Free federal and state tax filing The purpose of an accrual method of accounting is to match income and expenses in the correct year. Free federal and state tax filing Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. Free federal and state tax filing Example. Free federal and state tax filing You are a calendar year accrual method taxpayer. Free federal and state tax filing You sold a computer on December 28, 2013. Free federal and state tax filing You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. Free federal and state tax filing You must include the amount received for the computer in your 2013 income. Free federal and state tax filing Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. Free federal and state tax filing Estimated income. Free federal and state tax filing   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. Free federal and state tax filing Change in payment schedule for services. Free federal and state tax filing   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. Free federal and state tax filing Advance payments for services. Free federal and state tax filing   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. Free federal and state tax filing However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. Free federal and state tax filing However, you cannot postpone including any payment beyond that tax year. Free federal and state tax filing   For more information, see Advance Payment for Services under Accrual Method in Publication 538. Free federal and state tax filing That publication also explains special rules for reporting the following types of income. Free federal and state tax filing Advance payments for service agreements. Free federal and state tax filing Prepaid rent. Free federal and state tax filing Advance payments for sales. Free federal and state tax filing   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. Free federal and state tax filing If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. Free federal and state tax filing An agreement includes a gift certificate that can be redeemed for goods. Free federal and state tax filing Treat amounts that are due and payable as amounts you received. Free federal and state tax filing   You generally include an advance payment in income for the tax year in which you receive it. Free federal and state tax filing However, you can use an alternative method. Free federal and state tax filing For information about the alternative method, see Publication 538. Free federal and state tax filing Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Free federal and state tax filing The all-events test has been met. Free federal and state tax filing The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Free federal and state tax filing Economic performance has occurred. Free federal and state tax filing Economic performance. Free federal and state tax filing   You generally cannot deduct or capitalize a business expense until economic performance occurs. Free federal and state tax filing If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Free federal and state tax filing If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Free federal and state tax filing An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Free federal and state tax filing For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. Free federal and state tax filing Example. Free federal and state tax filing You are a calendar year taxpayer and use an accrual method of accounting. Free federal and state tax filing You buy office supplies in December 2013. Free federal and state tax filing You receive the supplies and the bill in December, but you pay the bill in January 2014. Free federal and state tax filing You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. Free federal and state tax filing Your office supplies may qualify as a recurring expense. Free federal and state tax filing In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). Free federal and state tax filing Keeping inventories. Free federal and state tax filing   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. Free federal and state tax filing If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. Free federal and state tax filing For more information, see Inventories , later. Free federal and state tax filing Special rule for related persons. Free federal and state tax filing   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. Free federal and state tax filing Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Free federal and state tax filing If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. Free federal and state tax filing   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Free federal and state tax filing For a list of other related persons, see section 267 of the Internal Revenue Code. Free federal and state tax filing Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Free federal and state tax filing However, the following restrictions apply. Free federal and state tax filing If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. Free federal and state tax filing (See, however, Inventories, later. Free federal and state tax filing ) You can use the cash method for all other items of income and expenses. Free federal and state tax filing If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Free federal and state tax filing If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Free federal and state tax filing If you use a combination method that includes the cash method, treat that combination method as the cash method. Free federal and state tax filing Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. Free federal and state tax filing However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Free federal and state tax filing These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Free federal and state tax filing A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Free federal and state tax filing A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Free federal and state tax filing Qualifying taxpayer. Free federal and state tax filing   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. Free federal and state tax filing (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. Free federal and state tax filing ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. Free federal and state tax filing Qualifying small business taxpayer. Free federal and state tax filing   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. Free federal and state tax filing (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Free federal and state tax filing ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Free federal and state tax filing Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). Free federal and state tax filing Business not owned or not in existence for 3 years. Free federal and state tax filing   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. Free federal and state tax filing If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. Free federal and state tax filing Materials and supplies that are not incidental. Free federal and state tax filing   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. Free federal and state tax filing If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. Free federal and state tax filing Changing accounting method. Free federal and state tax filing   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. Free federal and state tax filing See Change in Accounting Method, later. Free federal and state tax filing More information. Free federal and state tax filing    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Free federal and state tax filing For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Free federal and state tax filing Items included in inventory. Free federal and state tax filing   If you are required to account for inventories, include the following items when accounting for your inventory. Free federal and state tax filing Merchandise or stock in trade. Free federal and state tax filing Raw materials. Free federal and state tax filing Work in process. Free federal and state tax filing Finished products. Free federal and state tax filing Supplies that physically become a part of the item intended for sale. Free federal and state tax filing Valuing inventory. Free federal and state tax filing   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). Free federal and state tax filing To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. Free federal and state tax filing   Inventory valuation rules cannot be the same for all kinds of businesses. Free federal and state tax filing The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Free federal and state tax filing Your inventory practices must be consistent from year to year. Free federal and state tax filing More information. Free federal and state tax filing   For more information about inventories, see Publication 538. Free federal and state tax filing Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. Free federal and state tax filing Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Free federal and state tax filing You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free federal and state tax filing Activities subject to the uniform capitalization rules. Free federal and state tax filing   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Free federal and state tax filing Produce real or tangible personal property. Free federal and state tax filing For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Free federal and state tax filing Acquire property for resale. Free federal and state tax filing Exceptions. Free federal and state tax filing   These rules do not apply to the following property. Free federal and state tax filing Personal property you acquire for resale if your average annual gross receipts are $10 million or less. Free federal and state tax filing Property you produce if you meet either of the following conditions. Free federal and state tax filing Your indirect costs of producing the property are $200,000 or less. Free federal and state tax filing You use the cash method of accounting and do not account for inventories. Free federal and state tax filing For more information, see Inventories, earlier. Free federal and state tax filing Special Methods There are special methods of accounting for certain items of income or expense. Free federal and state tax filing These include the following. Free federal and state tax filing Amortization, discussed in chapter 8 of Publication 535, Business Expenses. Free federal and state tax filing Bad debts, discussed in chapter 10 of Publication 535. Free federal and state tax filing Depletion, discussed in chapter 9 of Publication 535. Free federal and state tax filing Depreciation, discussed in Publication 946, How To Depreciate Property. Free federal and state tax filing Installment sales, discussed in Publication 537, Installment Sales. Free federal and state tax filing Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Free federal and state tax filing A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. Free federal and state tax filing To get approval, you must file Form 3115, Application for Change in Accounting Method. Free federal and state tax filing You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. Free federal and state tax filing You may have to pay a user fee. Free federal and state tax filing For more information, see the form instructions. Free federal and state tax filing Automatic change procedures. Free federal and state tax filing   Certain taxpayers can presume to have IRS approval to change their method of accounting. Free federal and state tax filing The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. Free federal and state tax filing No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. Free federal and state tax filing   Generally, you must use Form 3115 to request an automatic change. Free federal and state tax filing For more information, see the Instructions for Form 3115. Free federal and state tax filing Prev  Up  Next   Home   More Online Publications