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Free online state taxes 3. Free online state taxes   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. Free online state taxes Deductible contribution. Free online state taxes Nondeductible contribution. Free online state taxes You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). Free online state taxes Some adjustments to income follow. Free online state taxes Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. Free online state taxes Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. Free online state taxes See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. Free online state taxes Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Free online state taxes For more details, see Publication 535, Business Expenses. Free online state taxes Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). Free online state taxes For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. Free online state taxes Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). Free online state taxes Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. Free online state taxes Alimony payments (Form 1040, line 31a). Free online state taxes For more information, see Publication 504, Divorced or Separated Individuals. Free online state taxes There are other items you can claim as adjustments to income. Free online state taxes These adjustments are discussed in your tax return instructions. Free online state taxes Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. Free online state taxes A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Free online state taxes Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . Free online state taxes For more detailed information, see Publication 590. Free online state taxes Contributions. Free online state taxes   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. Free online state taxes Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. Free online state taxes    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. Free online state taxes Do not report this interest on your tax return as tax-exempt interest. Free online state taxes General limit. Free online state taxes   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. Free online state taxes Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). Free online state taxes Contributions to Kay Bailey Hutchison Spousal IRAs. Free online state taxes   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. Free online state taxes For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. Free online state taxes Deductible contribution. Free online state taxes   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. Free online state taxes However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Free online state taxes Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. Free online state taxes For more information, see Limit if Covered by Employer Plan in Publication 590. Free online state taxes Nondeductible contribution. Free online state taxes   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Free online state taxes You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. Free online state taxes    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). 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The Free Online State Taxes

Free online state taxes 7. Free online state taxes   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. Free online state taxes Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. Free online state taxes You must determine gross profit before you can deduct any business expenses. Free online state taxes These expenses are discussed in chapter 8. Free online state taxes If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. Free online state taxes Businesses that sell products. Free online state taxes   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. Free online state taxes Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). Free online state taxes Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. Free online state taxes   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). Free online state taxes The result is the gross profit from your business. Free online state taxes Businesses that sell services. Free online state taxes   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. Free online state taxes Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). Free online state taxes Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. Free online state taxes Illustration. Free online state taxes   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. Free online state taxes Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. Free online state taxes Gross receipts. Free online state taxes   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. Free online state taxes You may find it helpful to use cash registers to keep track of receipts. Free online state taxes You should also use a proper invoicing system and keep a separate bank account for your business. Free online state taxes Sales tax collected. Free online state taxes   Check to make sure your records show the correct sales tax collected. Free online state taxes   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. Free online state taxes   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. Free online state taxes Inventory at beginning of year. Free online state taxes   Compare this figure with last year's ending inventory. Free online state taxes The two amounts should usually be the same. Free online state taxes Purchases. Free online state taxes   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. Free online state taxes ) be sure to remove them from the cost of goods sold. Free online state taxes For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. Free online state taxes Inventory at end of year. Free online state taxes   Check to make sure your procedures for taking inventory are adequate. Free online state taxes These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. Free online state taxes   Use inventory forms and adding machine tapes as the only evidence for your inventory. Free online state taxes Inventory forms are available at office supply stores. Free online state taxes These forms have columns for recording the description, quantity, unit price, and value of each inventory item. Free online state taxes Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. Free online state taxes These forms will help satisfy you that the total inventory is accurate. Free online state taxes They will also provide you with a permanent record to support its validity. Free online state taxes   Inventories are discussed in chapter 2. Free online state taxes Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. Free online state taxes First, divide gross profit by net receipts. Free online state taxes The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. Free online state taxes Next, compare this percentage to your markup policy. Free online state taxes Little or no difference between these two percentages shows that your gross profit figure is accurate. Free online state taxes A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. Free online state taxes You should determine the reason for the difference. Free online state taxes Example. Free online state taxes   Joe Able operates a retail business. Free online state taxes On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. Free online state taxes The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. Free online state taxes His cost of goods sold is $200,000. Free online state taxes This results in a gross profit of $100,000 ($300,000 − $200,000). Free online state taxes To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). Free online state taxes The resulting 331/3% confirms his markup percentage of 331/3%. Free online state taxes Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. Free online state taxes The result is gross business income. Free online state taxes If you use Schedule C-EZ, include the income on line 1 of the schedule. Free online state taxes Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. Free online state taxes Prev  Up  Next   Home   More Online Publications