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Free Federal Tax Filing 2012

Free federal tax filing 2012 Publication 334 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Free federal tax filing 2012 Tax questions. Free federal tax filing 2012 Future Developments What's New for 2013 What's New for 2014 Reminders Photographs of Missing Children Introduction The purpose of this publication is to provide general information about the federal tax laws that apply to small business owners who are sole proprietors and to statutory employees. Free federal tax filing 2012 This publication has information on business income, expenses, and tax credits that may help you file your income tax return. Free federal tax filing 2012 Are you self-employed?   You are self-employed if you carry on a trade or business as a sole proprietor or an independent contractor. Free federal tax filing 2012 Sole proprietor. Free federal tax filing 2012   A sole proprietor is someone who owns an unincorporated business by himself or herself. Free federal tax filing 2012 However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. Free federal tax filing 2012 Trade or business. Free federal tax filing 2012    A trade or business is generally an activity carried on to make a profit. Free federal tax filing 2012 The facts and circumstances of each case determine whether or not an activity is a trade or business. Free federal tax filing 2012 You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. Free federal tax filing 2012 You do need to make ongoing efforts to further the interests of your business. Free federal tax filing 2012   You do not have to carry on regular full-time business activities to be self-employed. Free federal tax filing 2012 Having a part-time business in addition to your regular job or business may be self-employment. Free federal tax filing 2012 Independent contractor. Free federal tax filing 2012    People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. Free federal tax filing 2012 However, whether they are independent contractors or employees depends on the facts in each case. Free federal tax filing 2012 The general rule is that an individual is an independent contractor if the payer has the right to control or to direct only the result of the work and not how it will be done. Free federal tax filing 2012 The earnings of a person who is working as an independent contractor are subject to self-employment tax. Free federal tax filing 2012 For more information on determining whether you are an employee or independent contractor, see Publication 15-A, Employer's Supplemental Tax Guide. Free federal tax filing 2012 Statutory employee. Free federal tax filing 2012   A statutory employee has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. Free federal tax filing 2012 Statutory employees use Schedule C or C-EZ to report their wages and expenses. Free federal tax filing 2012 Limited liability company (LLC). Free federal tax filing 2012   A limited liability company (LLC) is an entity formed under state law by filing articles of organization. Free federal tax filing 2012 Generally, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. Free federal tax filing 2012 An owner who is an individual may use Schedule C or C-EZ. Free federal tax filing 2012 Business owned and operated by spouses. Free federal tax filing 2012   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Free federal tax filing 2012 Do not use Schedule C or C-EZ. Free federal tax filing 2012 Instead, file Form 1065, U. Free federal tax filing 2012 S. Free federal tax filing 2012 Return of Partnership Income. Free federal tax filing 2012 For more information, see Publication 541, Partnerships. Free federal tax filing 2012    Exception—Community income. Free federal tax filing 2012 If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Free federal tax filing 2012 S. Free federal tax filing 2012 possession, you can treat the business either as a sole proprietorship or a partnership. Free federal tax filing 2012 The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Free federal tax filing 2012 A change in your reporting position will be treated as a conversion of the entity. Free federal tax filing 2012    Exception—Qualified joint venture. Free federal tax filing 2012 If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Free federal tax filing 2012 Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Free federal tax filing 2012 For an explanation of "material participation," see the Instructions for Schedule C, line G. Free federal tax filing 2012   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Free federal tax filing 2012 Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Free federal tax filing 2012 For more information, see Qualified Joint Ventures in the Instructions for Schedule SE. Free federal tax filing 2012 This publication does not cover the topics listed in the following table. Free federal tax filing 2012    IF you need information about: THEN you should see: Corporations Publication 542 Farming Publication 225 Fishermen (Capital Construction Fund)  Publication 595 Partnerships Publication 541 Passive activities Publication 925 Recordkeeping Publication 583 Rental Publication 527 S corporations Instructions for Form 1120S What you need to know. Free federal tax filing 2012   Table A provides a list of questions you need to answer to help you meet your federal tax obligations. Free federal tax filing 2012 After each question is the location in this publication where you will find the related discussion. Free federal tax filing 2012 Table A. Free federal tax filing 2012 What You Need To Know About Federal Taxes (Note. Free federal tax filing 2012 The following is a list of questions you may need to answer so you can fill out your federal income tax return. Free federal tax filing 2012 Chapters are given to help you find the related discussion in this publication. Free federal tax filing 2012 ) What must I know   Where to find the answer   What kinds of federal taxes do I have to pay? How do I pay them?   See chapter 1. Free federal tax filing 2012 What forms must I file?   See chapter 1. Free federal tax filing 2012 What must I do if I have employees?   See Employment Taxes in chapter 1. Free federal tax filing 2012 Do I have to start my tax year in January, or can I start it in any other month?   See Accounting Periods in chapter 2. Free federal tax filing 2012 What method can I use to account for my income and expenses?   See Accounting Methods in chapter 2. Free federal tax filing 2012 What kinds of business income do I have to report on my tax return?   See chapter 5. Free federal tax filing 2012 What kinds of business expenses can I deduct on my tax return?   See Business Expenses in chapter 8. Free federal tax filing 2012 What kinds of expenses are not deductible as business expenses?   See Expenses You Cannot Deduct in chapter 8. Free federal tax filing 2012 What happens if I have a business loss? Can I deduct it?   See chapter 9. Free federal tax filing 2012 What must I do if I disposed of business property during the year?   See chapter 3. Free federal tax filing 2012 What are my rights as a taxpayer?   See chapter 11. Free federal tax filing 2012 Where do I go if I need help with federal tax matters?   See chapter 12. Free federal tax filing 2012 IRS mission. Free federal tax filing 2012   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Free federal tax filing 2012 Comments and suggestions. Free federal tax filing 2012   We welcome your comments about this publication and your suggestions for future editions. Free federal tax filing 2012   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free federal tax filing 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free federal tax filing 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free federal tax filing 2012   You can send your comments from www. Free federal tax filing 2012 irs. Free federal tax filing 2012 gov/formspubs/. Free federal tax filing 2012 Click on “More Information” then on “Comment on Tax Forms and Publications. Free federal tax filing 2012 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free federal tax filing 2012 Ordering forms and publications. Free federal tax filing 2012   Visit  www. Free federal tax filing 2012 irs. Free federal tax filing 2012 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free federal tax filing 2012  Internal Revenue Service 1201 N. Free federal tax filing 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free federal tax filing 2012   If you have a tax question, check the information available on IRS. Free federal tax filing 2012 gov or call 1-800-829-1040. Free federal tax filing 2012 We cannot answer tax questions sent to either of the above addresses. Free federal tax filing 2012 Future Developments For the latest information about developments related to Publication 334, such as legislation enacted after it was published, go to www. Free federal tax filing 2012 irs. Free federal tax filing 2012 gov/pub334. Free federal tax filing 2012 What's New for 2013 The following are some of the tax changes for 2013. Free federal tax filing 2012 For information on other changes, go to IRS. Free federal tax filing 2012 gov. Free federal tax filing 2012 Tax rates. Free federal tax filing 2012 . Free federal tax filing 2012  For tax years beginning in 2013, the social security part of the self-employment tax increases to 12. Free federal tax filing 2012 4%. Free federal tax filing 2012 The Medicare part of the tax remains at 2. Free federal tax filing 2012 9%. Free federal tax filing 2012 As a result, the self-employment tax is 15. Free federal tax filing 2012 3%. Free federal tax filing 2012 Maximum net earnings. Free federal tax filing 2012  The maximum net self-employment earnings subject to the social security part of the self-employment tax increases to $113,700 for 2013. Free federal tax filing 2012 There is no maximum limit on earnings subject to the Medicare part. Free federal tax filing 2012 Standard mileage rate. Free federal tax filing 2012  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. Free federal tax filing 2012 5 cents per mile. Free federal tax filing 2012 For more information, see Car and Truck Expenses in chapter 8. Free federal tax filing 2012 Simplified method for business use of home deduction. Free federal tax filing 2012 . Free federal tax filing 2012  The IRS now provides a simplified method to determine your expenses for business use of your home. Free federal tax filing 2012 For more information, see Business Use of Your Home in chapter 8. Free federal tax filing 2012 What's New for 2014 The following are some of the tax changes for 2014. Free federal tax filing 2012 For information on other changes, go to IRS. Free federal tax filing 2012 gov. Free federal tax filing 2012 Standard mileage rate. Free federal tax filing 2012  For 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. Free federal tax filing 2012 Self-employment tax. Free federal tax filing 2012  The maximum net self-employment earnings subject to the social security part of the self-employment tax is $117,000 for 2014. Free federal tax filing 2012 Reminders Accounting methods. Free federal tax filing 2012  Certain small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required to account for inventories. Free federal tax filing 2012 For more information, see Inventories in chapter 2. Free federal tax filing 2012 Reportable transactions. Free federal tax filing 2012  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. Free federal tax filing 2012 You may have to pay a penalty if you are required to file Form 8886 but do not do so. Free federal tax filing 2012 You may also have to pay interest and penalties on any reportable transaction understatements. Free federal tax filing 2012 Reportable transactions include: Transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, Transactions offered to you under conditions of confidentiality for which you paid an advisor a minimum fee, Transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits, Transactions that result in losses of at least $2 million in any single tax year ($50,000 if from certain foreign currency transactions) or $4 million in any combination of tax years, and Transactions the same or substantially similar to one of the types of transactions the IRS has identified as a transaction of interest. Free federal tax filing 2012 For more information, see the Instructions for Form 8886. Free federal tax filing 2012 Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free federal tax filing 2012 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free federal tax filing 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free federal tax filing 2012 Prev  Up  Next   Home   More Online Publications
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Free federal tax filing 2012 5. Free federal tax filing 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. Free federal tax filing 2012 Making the election. Free federal tax filing 2012 Form 3115. Free federal tax filing 2012 Income TaxesAccrual of contested income taxes. Free federal tax filing 2012 Employment Taxes Other TaxesAdditional Medicare Tax. Free federal tax filing 2012 What's New Additional Medicare Tax. Free federal tax filing 2012  Beginning in 2013, you must withhold a 0. Free federal tax filing 2012 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Free federal tax filing 2012 Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Free federal tax filing 2012 See Employment Taxes , and Self-employment tax , later. Free federal tax filing 2012 Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Free federal tax filing 2012 You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Free federal tax filing 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. Free federal tax filing 2012 When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Free federal tax filing 2012 This applies whether you use the cash method or an accrual method of accounting. Free federal tax filing 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. Free federal tax filing 2012 You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Free federal tax filing 2012 Limit on accrual of taxes. Free federal tax filing 2012   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Free federal tax filing 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. Free federal tax filing 2012 Example. Free federal tax filing 2012 Your state imposes a tax on personal property used in a trade or business conducted in the state. Free federal tax filing 2012 This tax is assessed and becomes a lien as of July 1 (accrual date). Free federal tax filing 2012 In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Free federal tax filing 2012 Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Free federal tax filing 2012 You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Free federal tax filing 2012 Uniform capitalization rules. Free federal tax filing 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. Free federal tax filing 2012 They also apply to certain taxpayers who acquire property for resale. Free federal tax filing 2012 Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Free federal tax filing 2012 For more information, see chapter 1. Free federal tax filing 2012 Carrying charges. Free federal tax filing 2012   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Free federal tax filing 2012 You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Free federal tax filing 2012 For more information, see chapter 7. Free federal tax filing 2012 Refunds of taxes. Free federal tax filing 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. Free federal tax filing 2012 For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Free federal tax filing 2012    You must include in income any interest you receive on tax refunds. Free federal tax filing 2012 Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Free federal tax filing 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. Free federal tax filing 2012 Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Free federal tax filing 2012 See Taxes for local benefits , later. Free federal tax filing 2012 If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Free federal tax filing 2012 However, you can elect to ratably accrue the taxes during the year. Free federal tax filing 2012 See Electing to ratably accrue , later. Free federal tax filing 2012 Taxes for local benefits. Free federal tax filing 2012   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Free federal tax filing 2012 These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Free federal tax filing 2012 You should increase the basis of your property by the amount of the assessment. Free federal tax filing 2012   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Free federal tax filing 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. Free federal tax filing 2012 Example. Free federal tax filing 2012 To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Free federal tax filing 2012 The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Free federal tax filing 2012 The city is paying the principal and interest with the annual payments made by the property owners. Free federal tax filing 2012 The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Free federal tax filing 2012 The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Free federal tax filing 2012 Charges for services. Free federal tax filing 2012   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Free federal tax filing 2012 Purchase or sale of real estate. Free federal tax filing 2012   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Free federal tax filing 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. Free federal tax filing 2012 Treat the seller as paying the taxes up to but not including the date of sale. Free federal tax filing 2012 Treat the buyer as paying the taxes beginning with the date of sale. Free federal tax filing 2012 You can usually find this information on the settlement statement you received at closing. Free federal tax filing 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. Free federal tax filing 2012 Example. Free federal tax filing 2012 Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Free federal tax filing 2012 He has not elected to ratably accrue property taxes. Free federal tax filing 2012 November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Free federal tax filing 2012 He sold the property on June 30, 2013. Free federal tax filing 2012 Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Free federal tax filing 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. Free federal tax filing 2012 Electing to ratably accrue. Free federal tax filing 2012   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Free federal tax filing 2012 Example. Free federal tax filing 2012 Juan Sanchez is a calendar year taxpayer who uses an accrual method. Free federal tax filing 2012 His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Free federal tax filing 2012 July 1 is the assessment and lien date. Free federal tax filing 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. Free federal tax filing 2012 Separate elections. Free federal tax filing 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. Free federal tax filing 2012 Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Free federal tax filing 2012 See Form 3115 , later. Free federal tax filing 2012 Making the election. Free federal tax filing 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. Free federal tax filing 2012 The statement should show all the following items. Free federal tax filing 2012 The trades or businesses to which the election applies and the accounting method or methods used. Free federal tax filing 2012 The period to which the taxes relate. Free federal tax filing 2012 The computation of the real estate tax deduction for that first year. Free federal tax filing 2012   Generally, you must file your return by the due date (including extensions). Free federal tax filing 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). Free federal tax filing 2012 Attach the statement to the amended return and write “Filed pursuant to section 301. Free federal tax filing 2012 9100-2” on the statement. Free federal tax filing 2012 File the amended return at the same address where you filed the original return. Free federal tax filing 2012 Form 3115. Free federal tax filing 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. Free federal tax filing 2012 For more information, including applicable time frames for filing, see the Instructions for Form 3115. Free federal tax filing 2012 Note. Free federal tax filing 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. Free federal tax filing 2012 R. Free federal tax filing 2012 B. Free federal tax filing 2012 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Free federal tax filing 2012 R. Free federal tax filing 2012 B. Free federal tax filing 2012 689, and Revenue Procedure 2012-20, 2012-14 I. Free federal tax filing 2012 R. Free federal tax filing 2012 B. Free federal tax filing 2012 700, or any successor. Free federal tax filing 2012 Revenue Procedure 2011-14 is available at  www. Free federal tax filing 2012 irs. Free federal tax filing 2012 gov/irb/2011-04IRB/ar08. Free federal tax filing 2012 html. Free federal tax filing 2012 Income Taxes This section discusses federal, state, local, and foreign income taxes. Free federal tax filing 2012 Federal income taxes. Free federal tax filing 2012   You cannot deduct federal income taxes. Free federal tax filing 2012 State and local income taxes. Free federal tax filing 2012   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Free federal tax filing 2012 An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Free federal tax filing 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. Free federal tax filing 2012 Accrual of contested income taxes. Free federal tax filing 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. Free federal tax filing 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. Free federal tax filing 2012 You cannot deduct them in the year in which the liability is finally determined. Free federal tax filing 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. Free federal tax filing 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. Free federal tax filing 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. Free federal tax filing 2012 You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Free federal tax filing 2012 For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Free federal tax filing 2012 Foreign income taxes. Free federal tax filing 2012   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Free federal tax filing 2012 S. Free federal tax filing 2012 possession. Free federal tax filing 2012 However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Free federal tax filing 2012 S. Free federal tax filing 2012 tax under the foreign earned income exclusion or the foreign housing exclusion. Free federal tax filing 2012 For information on these exclusions, see Publication 54, Tax Guide for U. Free federal tax filing 2012 S. Free federal tax filing 2012 Citizens and Resident Aliens Abroad. Free federal tax filing 2012 For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Free federal tax filing 2012 Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Free federal tax filing 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. Free federal tax filing 2012 You may also need to pay certain employment taxes from your own funds. Free federal tax filing 2012 These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Free federal tax filing 2012 Note. Free federal tax filing 2012 Additional Medicare Tax is only imposed on the employee. Free federal tax filing 2012 There is no employer share of Additional Medicare Tax. Free federal tax filing 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. Free federal tax filing 2012 You can deduct the employment taxes you must pay from your own funds as taxes. Free federal tax filing 2012 Example. Free federal tax filing 2012 You pay your employee $18,000 a year. Free federal tax filing 2012 However, after you withhold various taxes, your employee receives $14,500. Free federal tax filing 2012 You also pay an additional $1,500 in employment taxes. Free federal tax filing 2012 You should deduct the full $18,000 as wages. Free federal tax filing 2012 You can deduct the $1,500 you pay from your own funds as taxes. Free federal tax filing 2012 For more information on employment taxes, see Publication 15 (Circular E). Free federal tax filing 2012 Unemployment fund taxes. Free federal tax filing 2012   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Free federal tax filing 2012 Deduct these payments as taxes. Free federal tax filing 2012 Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Free federal tax filing 2012 Excise taxes. Free federal tax filing 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. Free federal tax filing 2012 However, see Fuel taxes , later. Free federal tax filing 2012   For more information on excise taxes, see Publication 510. Free federal tax filing 2012 Franchise taxes. Free federal tax filing 2012   You can deduct corporate franchise taxes as a business expense. Free federal tax filing 2012 Fuel taxes. Free federal tax filing 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. Free federal tax filing 2012 Do not deduct these taxes as a separate item. Free federal tax filing 2012   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Free federal tax filing 2012 For more information, see Publication 510. Free federal tax filing 2012 Occupational taxes. Free federal tax filing 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. Free federal tax filing 2012 Personal property tax. Free federal tax filing 2012   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Free federal tax filing 2012 Sales tax. Free federal tax filing 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. Free federal tax filing 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. Free federal tax filing 2012 If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Free federal tax filing 2012 If the property is depreciable, add the sales tax to the basis for depreciation. Free federal tax filing 2012 For more information on basis, see Publication 551. Free federal tax filing 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. Free federal tax filing 2012 Also, do not include these taxes in gross receipts or sales. Free federal tax filing 2012 Self-employment tax. Free federal tax filing 2012   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Free federal tax filing 2012 This deduction only affects your income tax. Free federal tax filing 2012 It does not affect your net earnings from self-employment or your self-employment tax. Free federal tax filing 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). Free federal tax filing 2012   For more information on self-employment tax, see Publication 334. Free federal tax filing 2012 Additional Medicare Tax. Free federal tax filing 2012   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Free federal tax filing 2012 See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Free federal tax filing 2012 Prev  Up  Next   Home   More Online Publications