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Free Tax Filing For Seniors

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Free Tax Filing For Seniors

Free tax filing for seniors Index A Accelerated death benefits, Accelerated Death Benefits Accounting periods Change in, standard deduction not allowed, Persons not eligible for the standard deduction. Free tax filing for seniors Accrued leave payment Disability retirement and, Accrued leave payment. Free tax filing for seniors Adjusted gross income (AGI), Adjustments to Income Adjustments to income, Adjustments to Income Age Standard deduction for age 65 or older, Higher standard deduction for age (65 or older). Free tax filing for seniors Age 65, Qualified Individual American Association of Retired Persons (AARP), Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Free tax filing for seniors Annuities, Pensions and Annuities Assistance (see Tax help) B Base amount, social security benefits, Base Amount Benefits Accident or health, Other compensation. Free tax filing for seniors Long-term care, Long-Term Care Insurance Contracts No-fault insurance, Other compensation. Free tax filing for seniors Sickness and injury, Sickness and Injury Benefits Social security, Are Any of Your Benefits Taxable? Veterans', Veterans' benefits. Free tax filing for seniors Bequests, Gifts and inheritances. Free tax filing for seniors Blind persons Standard deduction for, Higher standard deduction for blindness. Free tax filing for seniors C Child and dependent care credit, Child and Dependent Care Credit Children Standard deduction for, Standard Deduction for Dependents Chronically ill persons, Chronically ill individual. Free tax filing for seniors Chronically ill, defined, Terminally or chronically ill defined. Free tax filing for seniors Compensation For services, Compensation for Services Loss or disfigurement, Other compensation. Free tax filing for seniors Contributions Foreign employment, Foreign employment contributions. Free tax filing for seniors Pension or annuity, Cost. Free tax filing for seniors Cost, pension or annuity, Cost. Free tax filing for seniors Credit Child and dependent care, Child and Dependent Care Credit Earned income, Earned Income Credit (EIC) The elderly or the disabled, Credit for the Elderly or the Disabled Credit for the elderly or the disabled, Credit for the Elderly or the Disabled D Death benefit, accelerated, Accelerated Death Benefits Decedents, Dependents. Free tax filing for seniors Standard deduction, Decedent's final return. Free tax filing for seniors Deductions Generally, Deductions Insurance premiums, Medical Insurance Premiums Itemized, Itemized Deductions Meals and lodging, Meals and Lodging Medical and dental, Medical and Dental Expenses Standard, Standard Deduction Dependents, Dependents. Free tax filing for seniors Standard deduction for, Standard Deduction for Dependents Disabilities, individuals with Ownership and use test, Exception to use test for individuals with a disability. Free tax filing for seniors Disability Person with, Persons with disabilities. Free tax filing for seniors Physician's statement, Physician's statement. Free tax filing for seniors Total and permanent, Permanent and total disability. Free tax filing for seniors Disability income, Disability Pensions, Other compensation. Free tax filing for seniors , Disability income. Free tax filing for seniors Distributions, retirement plan, Retirement Plan Distributions Drugs (see Medicines) Dual-status taxpayers Standard deduction, Persons not eligible for the standard deduction. Free tax filing for seniors E Early distributions, tax, Tax on Early Distributions Earned income credit, Earned Income Credit (EIC) Elderly or disabled credit, Credit for the Elderly or the Disabled Elderly persons Standard deduction for age 65 or older, Higher standard deduction for age (65 or older). Free tax filing for seniors Employment tax withholding, Reminders Employment taxes, Employment taxes. Free tax filing for seniors Endowment proceeds, Endowment Contract Proceeds Estimated tax, Tax Withholding and Estimated Tax, Estimated Tax, Who Must Make Estimated Tax Payments Excess accumulation, tax on, Tax on Excess Accumulation Exclusion, gain on sale of home, Maximum Amount of Exclusion F Federal Employees Compensation Act (FECA) payments, Federal Employees' Compensation Act (FECA). Free tax filing for seniors Filing requirements Decedents, Dependents. Free tax filing for seniors General requirements, General Requirements Surviving spouse, Surviving spouse. Free tax filing for seniors Final return for decedent Standard deduction, Decedent's final return. Free tax filing for seniors First-time homebuyer credit Recapture, Repaying the first-time homebuyer credit because you sold your home. Free tax filing for seniors Form, Credit for the Elderly or the Disabled, Physician's statement. Free tax filing for seniors 1099-R, Form 1099-R. Free tax filing for seniors , Form 1099-R. Free tax filing for seniors 5329, Form 5329. Free tax filing for seniors 8853, Accelerated Death Benefits Schedule R, Credit for the Elderly or the Disabled, Physician's statement. Free tax filing for seniors W-4P, Withholding. Free tax filing for seniors Free tax services, Free help with your tax return. Free tax filing for seniors G Gain on sale of home (see Sale of home) General rule, pension or annuity, Pensions and Annuities Gifts, Gifts and inheritances. Free tax filing for seniors H Help (see Tax help) Home care (see Nursing services) Home improvements, Home Improvements Home, sale of, Sale of Home Hospital services, Hospital Services Household help, Household Help I Income Adjustments, Adjustments to Income Disability, Disability Pensions, Disability income. Free tax filing for seniors Gross, defined, Gross income. Free tax filing for seniors Nontaxable, Taxable and Nontaxable Income Sale of home, Sale of Home Self-employment, Self-employed persons. Free tax filing for seniors Taxable, Taxable and Nontaxable Income Individual retirement arrangement (IRA) Adjustments to income, Individual Retirement Arrangement (IRA) Contributions and Deductions Contributions, Contributions. Free tax filing for seniors Deductible contribution, Deductible contribution. Free tax filing for seniors Distributions, Individual Retirement Arrangements (IRAs) Inheritances, Gifts and inheritances. Free tax filing for seniors Injury benefits, Sickness and Injury Benefits, Cost paid by you. Free tax filing for seniors Insurance Accident and health, Other compensation. Free tax filing for seniors , Medical Insurance Premiums Benefits, long-term care, Long-Term Care Insurance Contracts Benefits, no-fault insurance, Other compensation. Free tax filing for seniors Life insurance proceeds, Life Insurance Proceeds Proceeds paid after death, Life Insurance Proceeds Proceeds paid before death, Accelerated Death Benefits Insurance premiums for retired public safety officers, Insurance Premiums for Retired Public Safety Officers Itemized deductions, Itemized Deductions Married filing separately One spouse has itemized, Persons not eligible for the standard deduction. Free tax filing for seniors L Life insurance proceeds, Life Insurance Proceeds Long-term care, Long-Term Care Chronically ill individuals, Chronically ill individual. Free tax filing for seniors Maintenance and personal care services, Maintenance and personal care services. Free tax filing for seniors Qualified insurance contracts, Qualified long-term care insurance contracts. Free tax filing for seniors Qualified services, Qualified long-term care services. Free tax filing for seniors Long-term care insurance, Long-Term Care Insurance Contracts Loss or disfigurement compensation, Other compensation. Free tax filing for seniors Lump-sum distributions, Lump-sum distributions. Free tax filing for seniors Lump-sum election, social security, Lump-Sum Election M Maintenance and personal care services, Maintenance and personal care services. Free tax filing for seniors Married filing separately Itemized deductions One spouse has itemized so other must as well, Persons not eligible for the standard deduction. Free tax filing for seniors Married taxpayers Age 65 or older spouse Standard deduction, Spouse 65 or older or blind. Free tax filing for seniors Blind spouse Standard deduction, Spouse 65 or older or blind. Free tax filing for seniors Meals and lodging expenses, Meals and Lodging Medical expenses, Medical and Dental Expenses Medicare, Medicare Part A. Free tax filing for seniors , Medicare Part B. Free tax filing for seniors , Medicare Part D. Free tax filing for seniors Benefits, Medicare. Free tax filing for seniors Medicines, Medicines Imported, Imported medicines and drugs. Free tax filing for seniors Military retirement pay, Military Retirement Pay Minimum distributions, Tax on Excess Accumulation Minimum wage, Substantial gainful activity. Free tax filing for seniors Missing children, Reminders Mortgage assistance payments, Mortgage assistance payments. Free tax filing for seniors N Nonperiodic distributions, Nonperiodic Distributions Nonqualified use, Period of nonqualified use. Free tax filing for seniors Nonresident aliens Standard deduction, Persons not eligible for the standard deduction. Free tax filing for seniors Nontaxable income, Payments from a state fund for victims of crime. Free tax filing for seniors Accident or health insurance benefits, Other compensation. Free tax filing for seniors Bequests, Gifts and inheritances. Free tax filing for seniors Generally, Taxable and Nontaxable Income Gifts, Gifts and inheritances. Free tax filing for seniors Inheritances, Gifts and inheritances. Free tax filing for seniors Mortgage assistance payments, Mortgage assistance payments. Free tax filing for seniors No-fault insurance benefits, Other compensation. Free tax filing for seniors Nutrition program for elderly, Nutrition Program for the Elderly. Free tax filing for seniors Public assistance payments, Welfare benefits. Free tax filing for seniors Sickness and injury benefits, Sickness and Injury Benefits Veterans' benefits, Veterans' benefits. Free tax filing for seniors Winter energy use, Payments to reduce cost of winter energy use. Free tax filing for seniors Workers' compensation, Workers' Compensation Nursing home, Nursing home. Free tax filing for seniors Nursing services, Nursing Services Chronically ill individuals, Chronically ill individual. Free tax filing for seniors Nutrition program for elderly, Nutrition Program for the Elderly. Free tax filing for seniors O Old-age, survivors, and disability insurance benefits (OASDI), Old-age, survivors, and disability insurance benefits (OASDI). Free tax filing for seniors Other items, Other Items Overall limitation, Overall limitation. Free tax filing for seniors P Payments, estimated tax, Estimated Tax Pensions, Pensions and Annuities Pensions, disability, Disability Pensions Photographs, missing children, Reminders Physician's statement, disability, Physician's statement. Free tax filing for seniors Prepaid insurance premiums, Prepaid insurance premiums. Free tax filing for seniors Preparer, paid, Reminders Preparing your return, Return preparation assistance. Free tax filing for seniors Profit-sharing plan, Retirement and profit-sharing plans. Free tax filing for seniors Public assistance payments, Welfare benefits. Free tax filing for seniors Publications (see Tax help) Q Qualified retirement plan, Tax on Early Distributions R Railroad retirement benefits, Railroad Retirement Benefits, Social Security and Equivalent Railroad Retirement Benefits Repayments Social security benefits, Repayment of Benefits Reporting pension income, How to report. Free tax filing for seniors Residence, sale of, Sale of Home Retirement plans, distributions, Retirement Plan Distributions Returns Decedent, Dependents. Free tax filing for seniors Executors and administrators, Dependents. Free tax filing for seniors Filing requirements, 2013 Filing Requirements Surviving spouse, Surviving spouse. Free tax filing for seniors Reverse mortgages, Reverse Mortgages S Salaries (see Compensation) Sale of Home First-time homebuyer credit, Repaying the first-time homebuyer credit because you sold your home. Free tax filing for seniors Surviving spouse, Reminders Sale of home, Sale of Home Self-employed, Self-employed persons. Free tax filing for seniors Short tax year Change in annual accounting period, Persons not eligible for the standard deduction. Free tax filing for seniors Sickness and injury benefits, Sickness and Injury Benefits Simplified method, Pensions and Annuities Social security benefits, Social Security and Equivalent Railroad Retirement Benefits Standard deduction, Standard Deduction Age 65 or older, Higher standard deduction for age (65 or older). Free tax filing for seniors Blind persons, Higher standard deduction for blindness. Free tax filing for seniors Dependents, Standard Deduction for Dependents Final return of decedent, Decedent's final return. Free tax filing for seniors Married filing separately One spouse has itemized, Persons not eligible for the standard deduction. Free tax filing for seniors Starting date, annuity, Cost. Free tax filing for seniors State fund for victims of crime, Payments from a state fund for victims of crime. Free tax filing for seniors Substantial gainful activity, Substantial gainful activity. Free tax filing for seniors Surrender of Iife insurance, Surrender of policy for cash. Free tax filing for seniors Surviving Spouse, Reminders Surviving spouse, Surviving spouse. Free tax filing for seniors Surviving spouse, insurance, Surviving spouse. Free tax filing for seniors Survivors of retirees, Survivors of retirees. Free tax filing for seniors T Tax Early distributions, Tax on Early Distributions Estimated, Tax Withholding and Estimated Tax, Estimated Tax Excess accumulation, Tax on Excess Accumulation Tax counseling for the elderly (TCE), Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Free tax filing for seniors Tax help, How To Get Tax Help Tax option, 10-year, Lump-sum distributions. Free tax filing for seniors Tax return preparers, Reminders Taxable income, Taxable and Nontaxable Income Taxation of benefits, Are Any of Your Benefits Taxable? Terminally ill, defined, Terminally or chronically ill defined. Free tax filing for seniors Total and permanent disability, defined, Permanent and total disability. Free tax filing for seniors Transportation expenses, Transportation TTY/TDD information, How To Get Tax Help U U. Free tax filing for seniors S. Free tax filing for seniors citizen or resident, U. Free tax filing for seniors S. Free tax filing for seniors citizen or resident alien. Free tax filing for seniors Unemployment compensation, Unemployment compensation. Free tax filing for seniors V Veterans' benefits, Veterans' benefits. Free tax filing for seniors Viatical settlement, Accelerated Death Benefits Victims of crime, Payments from a state fund for victims of crime. Free tax filing for seniors Volunteer income tax assistance (VITA), Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Free tax filing for seniors Volunteer work, Volunteer work. Free tax filing for seniors W Wages (see Compensation) Winter energy use payments, Payments to reduce cost of winter energy use. Free tax filing for seniors Withholding Employment tax, Reminders Pensions and annuities, Withholding. Free tax filing for seniors Workers' compensation, Workers' Compensation Worksheets, social security, Which worksheet to use. Free tax filing for seniors Prev  Up     Home   More Online Publications
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New Voluntary Closing Agreement Program Request Form

The Internal Revenue Service released the new Form 14429, Tax Exempt Bonds Voluntary Closing Agreement Program Request. Completion, in full, of the new form is a requirement before the submission to the Tax Exempt Bonds Voluntary Closing Agreement Program (TEB VCAP) is accepted. The purpose of the new form is to assist issuers in organizing TEB VCAP submission requests and to ensure that their submissions are complete, in accordance with the requirements under Notice 2008-31, 2008-11 I.R.B. 592 and IRM 7.2.3. Use of the new form should avoid delays in processing a request because of missing information as well as facilitating the process for accepting and assigning requests.  

The Tax Exempt Bonds (TEB) function, within the Tax Exempt & Government Entities Division, administers TEB VCAP. Generally, TEB VCAP provides remedies for issuers of tax-advantaged bonds (tax-exempt bonds, tax credit bonds, and direct pay bonds) who voluntarily come forward to resolve a violation of the federal tax requirements applicable to a bond issue that the issuer cannot self-correct under programs described in the Income Tax Regulations (Regulations) or other published guidance. An issuer will generally receive a more favorable treatment in resolving its tax violation under TEB VCAP than it would for the same tax violation discovered during an IRS examination of their bonds. As such, TEB VCAP encourages issuers, and other parties involved in tax-advantaged bond transactions, to exercise due diligence in complying with the applicable federal tax laws. TEB VCAP also provides a vehicle to correct violations as expeditiously as possible before discovery of the violations during an IRS examination.

The improvement of the TEB VCAP program, through procedural enhancements, is a TEB commitment. The new Form 14429 is an example of the latest effort by TEB to improve the administration of the TEB VCAP program and further this commitment. Last year, TEB provided web content to provide more information about the TEB VCAP program as well as descriptions (provided in IRM 7.2.3.4) of the resolution standards for identified violations both for tax-exempt and certain direct pay bonds. TEB believes that these resolution standards encourage due diligence by providing certainty, to issuers and other parties, in understanding the methodologies available to resolve eligible violations.

IRM Section 7.2.3 provides additional procedural guidance on how to submit a TEB VCAP request. See TEB Voluntary Compliance under Information for the Tax Exempt Bond Community on TEB's website.

Page Last Reviewed or Updated: 04-Sep-2013

The Free Tax Filing For Seniors

Free tax filing for seniors Publication 538 - Main Content Table of Contents Accounting PeriodsCalendar Year Fiscal Year Short Tax Year Improper Tax Year Change in Tax Year Individuals Partnerships, S Corporations, and Personal Service Corporations (PSCs) Corporations (Other Than S Corporations and PSCs) Accounting MethodsSpecial methods. Free tax filing for seniors Hybrid method. Free tax filing for seniors Cash Method Accrual Method Inventories Change in Accounting Method How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Free tax filing for seniors Accounting Periods You must use a tax year to figure your taxable income. Free tax filing for seniors A tax year is an annual accounting period for keeping records and reporting income and expenses. Free tax filing for seniors An annual accounting period does not include a short tax year (discussed later). Free tax filing for seniors You can use the following tax years: A calendar year; or A fiscal year (including a 52-53-week tax year). Free tax filing for seniors Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Free tax filing for seniors A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Free tax filing for seniors You cannot adopt a tax year by merely: Filing an application for an extension of time to file an income tax return; Filing an application for an employer identification number (Form SS-4); or Paying estimated taxes. Free tax filing for seniors This section discusses: A calendar year. Free tax filing for seniors A fiscal year (including a period of 52 or 53 weeks). Free tax filing for seniors A short tax year. Free tax filing for seniors An improper tax year. Free tax filing for seniors A change in tax year. Free tax filing for seniors Special situations that apply to individuals. Free tax filing for seniors Restrictions that apply to the accounting period of a partnership, S corporation, or personal service corporation. Free tax filing for seniors Special situations that apply to corporations. Free tax filing for seniors Calendar Year A calendar year is 12 consecutive months beginning on January 1st and ending on December 31st. Free tax filing for seniors If you adopt the calendar year, you must maintain your books and records and report your income and expenses from January 1st through December 31st of each year. Free tax filing for seniors If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you obtain approval from the IRS to change it, or are otherwise allowed to change it without IRS approval. Free tax filing for seniors See Change in Tax Year, later. Free tax filing for seniors Generally, anyone can adopt the calendar year. Free tax filing for seniors However, you must adopt the calendar year if: You keep no books or records; You have no annual accounting period; Your present tax year does not qualify as a fiscal year; or You are required to use a calendar year by a provision in the Internal Revenue Code or the Income Tax Regulations. Free tax filing for seniors Fiscal Year A fiscal year is 12 consecutive months ending on the last day of any month except December 31st. Free tax filing for seniors If you are allowed to adopt a fiscal year, you must consistently maintain your books and records and report your income and expenses using the time period adopted. Free tax filing for seniors 52-53-Week Tax Year You can elect to use a 52-53-week tax year if you keep your books and records and report your income and expenses on that basis. Free tax filing for seniors If you make this election, your 52-53-week tax year must always end on the same day of the week. Free tax filing for seniors Your 52-53-week tax year must always end on: Whatever date this same day of the week last occurs in a calendar month, or Whatever date this same day of the week falls that is nearest to the last day of the calendar month. Free tax filing for seniors For example, if you elect a tax year that always ends on the last Monday in March, your 2012 tax year will end on March 25, 2013. Free tax filing for seniors Election. Free tax filing for seniors   To make the election for the 52-53-week tax year, attach a statement with the following information to your tax return. Free tax filing for seniors The month in which the new 52-53-week tax year ends. Free tax filing for seniors The day of the week on which the tax year always ends. Free tax filing for seniors The date the tax year ends. Free tax filing for seniors It can be either of the following dates on which the chosen day: Last occurs in the month in (1), above, or Occurs nearest to the last day of the month in (1), above. Free tax filing for seniors   When you figure depreciation or amortization, a 52-53-week tax year is generally considered a year of 12 calendar months. Free tax filing for seniors   To determine an effective date (or apply provisions of any law) expressed in terms of tax years beginning, including, or ending on the first or last day of a specified calendar month, a 52-53-week tax year is considered to: Begin on the first day of the calendar month beginning nearest to the first day of the 52-53-week tax year, and End on the last day of the calendar month ending nearest to the last day of the 52-53-week tax year. Free tax filing for seniors Example. Free tax filing for seniors Assume a tax provision applies to tax years beginning on or after July 1, 2012, which happens to be a Sunday. Free tax filing for seniors For this purpose, a 52-53-week tax year that begins on the last Tuesday of June, which falls on June 26, 2012, is treated as beginning on July 1, 2012. Free tax filing for seniors Short Tax Year A short tax year is a tax year of less than 12 months. Free tax filing for seniors A short period tax return may be required when you (as a taxable entity): Are not in existence for an entire tax year, or Change your accounting period. Free tax filing for seniors Tax on a short period tax return is figured differently for each situation. Free tax filing for seniors Not in Existence Entire Year Even if a taxable entity was not in existence for the entire year, a tax return is required for the time it was in existence. Free tax filing for seniors Requirements for filing the return and figuring the tax are generally the same as the requirements for a return for a full tax year (12 months) ending on the last day of the short tax year. Free tax filing for seniors Example 1. Free tax filing for seniors XYZ Corporation was organized on July 1, 2012. Free tax filing for seniors It elected the calendar year as its tax year. Free tax filing for seniors Therefore, its first tax return was due March 15, 2013. Free tax filing for seniors This short period return will cover the period from July 1, 2012, through December 31, 2012. Free tax filing for seniors Example 2. Free tax filing for seniors A calendar year corporation dissolved on July 23, 2012. Free tax filing for seniors Its final return is due by October 15, 2012. Free tax filing for seniors It will cover the short period from January 1, 2012, through July 23, 2012. Free tax filing for seniors Death of individual. Free tax filing for seniors   When an individual dies, a tax return must be filed for the decedent by the 15th day of the 4th month after the close of the individual's regular tax year. Free tax filing for seniors The decedent's final return will be a short period tax return that begins on January 1st, and ends on the date of death. Free tax filing for seniors In the case of a decedent who dies on December 31st, the last day of the regular tax year, a full calendar-year tax return is required. Free tax filing for seniors Example. Free tax filing for seniors   Agnes Green was a single, calendar year taxpayer. Free tax filing for seniors She died on March 6, 2012. Free tax filing for seniors Her final income tax return must be filed by April 15, 2013. Free tax filing for seniors It will cover the short period from January 1, 2012, to March 6, 2012. Free tax filing for seniors Figuring Tax for Short Year If the IRS approves a change in your tax year or you are required to change your tax year, you must figure the tax and file your return for the short tax period. Free tax filing for seniors The short tax period begins on the first day after the close of your old tax year and ends on the day before the first day of your new tax year. Free tax filing for seniors Figure tax for a short year under the general rule, explained below. Free tax filing for seniors You may then be able to use a relief procedure, explained later, and claim a refund of part of the tax you paid. Free tax filing for seniors General rule. Free tax filing for seniors   Income tax for a short tax year must be annualized. Free tax filing for seniors However, self-employment tax is figured on the actual self-employment income for the short period. Free tax filing for seniors Individuals. Free tax filing for seniors   An individual must figure income tax for the short tax year as follows. Free tax filing for seniors Determine your adjusted gross income (AGI) for the short tax year and then subtract your actual itemized deductions for the short tax year. Free tax filing for seniors You must itemize deductions when you file a short period tax return. Free tax filing for seniors Multiply the dollar amount of your exemptions by the number of months in the short tax year and divide the result by 12. Free tax filing for seniors Subtract the amount in (2) from the amount in (1). Free tax filing for seniors The result is your modified taxable income. Free tax filing for seniors Multiply the modified taxable income in (3) by 12, then divide the result by the number of months in the short tax year. Free tax filing for seniors The result is your annualized income. Free tax filing for seniors Figure the total tax on your annualized income using the appropriate tax rate schedule. Free tax filing for seniors Multiply the total tax by the number of months in the short tax year and divide the result by 12. Free tax filing for seniors The result is your tax for the short tax year. Free tax filing for seniors Relief procedure. Free tax filing for seniors   Individuals and corporations can use a relief procedure to figure the tax for the short tax year. Free tax filing for seniors It may result in less tax. Free tax filing for seniors Under this procedure, the tax is figured by two separate methods. Free tax filing for seniors If the tax figured under both methods is less than the tax figured under the general rule, you can file a claim for a refund of part of the tax you paid. Free tax filing for seniors For more information, see section 443(b)(2) of the Internal Revenue Code. Free tax filing for seniors Alternative minimum tax. Free tax filing for seniors   To figure the alternative minimum tax (AMT) due for a short tax year: Figure the annualized alternative minimum taxable income (AMTI) for the short tax period by completing the following steps. Free tax filing for seniors Multiply the AMTI by 12. Free tax filing for seniors Divide the result by the number of months in the short tax year. Free tax filing for seniors Multiply the annualized AMTI by the appropriate rate of tax under section 55(b)(1) of the Internal Revenue Code. Free tax filing for seniors The result is the annualized AMT. Free tax filing for seniors Multiply the annualized AMT by the number of months in the short tax year and divide the result by 12. Free tax filing for seniors   For information on the AMT for individuals, see the Instructions for Form 6251, Alternative Minimum Tax–Individuals. Free tax filing for seniors For information on the AMT for corporations, see the Instructions to Form 4626, Alternative Minimum Tax–Corporations. Free tax filing for seniors Tax withheld from wages. Free tax filing for seniors   You can claim a credit against your income tax liability for federal income tax withheld from your wages. Free tax filing for seniors Federal income tax is withheld on a calendar year basis. Free tax filing for seniors The amount withheld in any calendar year is allowed as a credit for the tax year beginning in the calendar year. Free tax filing for seniors Improper Tax Year Taxpayers that have adopted an improper tax year must change to a proper tax year. Free tax filing for seniors For example, if a taxpayer began business on March 15 and adopted a tax year ending on March 14 (a period of exactly 12 months), this would be an improper tax year. Free tax filing for seniors See Accounting Periods, earlier, for a description of permissible tax years. Free tax filing for seniors To change to a proper tax year, you must do one of the following. Free tax filing for seniors If you are requesting a change to a calendar tax year, file an amended income tax return based on a calendar tax year that corrects the most recently filed tax return that was filed on the basis of an improper tax year. Free tax filing for seniors Attach a completed Form 1128 to the amended tax return. Free tax filing for seniors Write “FILED UNDER REV. Free tax filing for seniors PROC. Free tax filing for seniors 85-15” at the top of Form 1128 and file the forms with the Internal Revenue Service Center where you filed your original return. Free tax filing for seniors If you are requesting a change to a fiscal tax year, file Form 1128 in accordance with the form instructions to request IRS approval for the change. Free tax filing for seniors Change in Tax Year Generally, you must file Form 1128 to request IRS approval to change your tax year. Free tax filing for seniors See the Instructions for Form 1128 for exceptions. Free tax filing for seniors If you qualify for an automatic approval request, a user fee is not required. Free tax filing for seniors Individuals Generally, individuals must adopt the calendar year as their tax year. Free tax filing for seniors An individual can adopt a fiscal year provided that the individual maintains his or her books and records on the basis of the adopted fiscal year. Free tax filing for seniors Partnerships, S Corporations, and Personal Service Corporations (PSCs) Generally, partnerships, S corporations (including electing S corporations), and PSCs must use a required tax year. Free tax filing for seniors A required tax year is a tax year that is required under the Internal Revenue Code and Income Tax Regulations. Free tax filing for seniors The entity does not have to use the required tax year if it receives IRS approval to use another permitted tax year or makes an election under section 444 of the Internal Revenue Code (discussed later). Free tax filing for seniors The following discussions provide the rules for partnerships, S corporations, and PSCs. Free tax filing for seniors Partnership A partnership must conform its tax year to its partners' tax years unless any of the following apply. Free tax filing for seniors The partnership makes an election under section 444 of the Internal Revenue Code to have a tax year other than a required tax year by filing Form 8716. Free tax filing for seniors The partnership elects to use a 52-53-week tax year that ends with reference to either its required tax year or a tax year elected under section 444. Free tax filing for seniors The partnership can establish a business purpose for a different tax year. Free tax filing for seniors The rules for the required tax year for partnerships are as follows. Free tax filing for seniors If one or more partners having the same tax year own a majority interest (more than 50%) in partnership profits and capital, the partnership must use the tax year of those partners. Free tax filing for seniors If there is no majority interest tax year, the partnership must use the tax year of all its principal partners. Free tax filing for seniors A principal partner is one who has a 5% or more interest in the profits or capital of the partnership. Free tax filing for seniors If there is no majority interest tax year and the principal partners do not have the same tax year, the partnership generally must use a tax year that results in the least aggregate deferral of income to the partners. Free tax filing for seniors If a partnership changes to a required tax year because of these rules, it can get automatic approval by filing Form 1128. Free tax filing for seniors Least aggregate deferral of income. Free tax filing for seniors   The tax year that results in the least aggregate deferral of income is determined as follows. Free tax filing for seniors Figure the number of months of deferral for each partner using one partner's tax year. Free tax filing for seniors Find the months of deferral by counting the months from the end of that tax year forward to the end of each other partner's tax year. Free tax filing for seniors Multiply each partner's months of deferral figured in step (1) by that partner's share of interest in the partnership profits for the year used in step (1). Free tax filing for seniors Add the amounts in step (2) to get the aggregate (total) deferral for the tax year used in step (1). Free tax filing for seniors Repeat steps (1) through (3) for each partner's tax year that is different from the other partners' years. Free tax filing for seniors   The partner's tax year that results in the lowest aggregate (total) number is the tax year that must be used by the partnership. Free tax filing for seniors If the calculation results in more than one tax year qualifying as the tax year with the least aggregate deferral, the partnership can choose any one of those tax years as its tax year. Free tax filing for seniors However, if one of the tax years that qualifies is the partnership's existing tax year, the partnership must retain that tax year. Free tax filing for seniors Example. Free tax filing for seniors A and B each have a 50% interest in partnership P, which uses a fiscal year ending June 30. Free tax filing for seniors A uses the calendar year and B uses a fiscal year ending November 30. Free tax filing for seniors P must change its tax year to a fiscal year ending November 30 because this results in the least aggregate deferral of income to the partners, as shown in the following table. Free tax filing for seniors Year End 12/31: Year End Profits Interest Months of Deferral Interest × Deferral A 12/31 0. Free tax filing for seniors 5 -0- -0- B 11/30 0. Free tax filing for seniors 5 11 5. Free tax filing for seniors 5 Total Deferral 5. Free tax filing for seniors 5 Year End 11/30: Year End Profits Interest Months of Deferral Interest × Deferral A 12/31 0. Free tax filing for seniors 5 1 0. Free tax filing for seniors 5 B 11/30 0. Free tax filing for seniors 5 -0- -0- Total Deferral 0. Free tax filing for seniors 5 When determination is made. Free tax filing for seniors   The determination of the tax year under the least aggregate deferral rules must generally be made at the beginning of the partnership's current tax year. Free tax filing for seniors However, the IRS can require the partnership to use another day or period that will more accurately reflect the ownership of the partnership. Free tax filing for seniors This could occur, for example, if a partnership interest was transferred for the purpose of qualifying for a particular tax year. Free tax filing for seniors Short period return. Free tax filing for seniors   When a partnership changes its tax year, a short period return must be filed. Free tax filing for seniors The short period return covers the months between the end of the partnership's prior tax year and the beginning of its new tax year. Free tax filing for seniors   If a partnership changes to the tax year resulting in the least aggregate deferral, it must file a Form 1128 with the short period return showing the computations used to determine that tax year. Free tax filing for seniors The short period return must indicate at the top of page 1, “FILED UNDER SECTION 1. Free tax filing for seniors 706-1. Free tax filing for seniors ” More information. Free tax filing for seniors   For more information about changing a partnership's tax year, and information about ruling requests, see the Instructions for Form 1128. Free tax filing for seniors S Corporation All S corporations, regardless of when they became an S corporation, must use a permitted tax year. Free tax filing for seniors A permitted tax year is any of the following. Free tax filing for seniors The calendar year. Free tax filing for seniors A tax year elected under section 444 of the Internal Revenue Code. Free tax filing for seniors See Section 444 Election, below for details. Free tax filing for seniors A 52-53-week tax year ending with reference to the calendar year or a tax year elected under section 444. Free tax filing for seniors Any other tax year for which the corporation establishes a business purpose. Free tax filing for seniors If an electing S corporation wishes to adopt a tax year other than a calendar year, it must request IRS approval using Form 2553, instead of filing Form 1128. Free tax filing for seniors For information about changing an S corporation's tax year and information about ruling requests, see the Instructions for Form 1128. Free tax filing for seniors Personal Service Corporation (PSC) A PSC must use a calendar tax year unless any of the following apply. Free tax filing for seniors The corporation makes an election under section 444 of the Internal Revenue Code. Free tax filing for seniors See Section 444 Election, below for details. Free tax filing for seniors The corporation elects to use a 52-53-week tax year ending with reference to the calendar year or a tax year elected under section 444. Free tax filing for seniors The corporation establishes a business purpose for a fiscal year. Free tax filing for seniors See the Instructions for Form 1120 for general information about PSCs. Free tax filing for seniors For information on adopting or changing tax years for PSCs and information about ruling requests, see the Instructions for Form 1128. Free tax filing for seniors Section 444 Election A partnership, S corporation, electing S corporation, or PSC can elect under section 444 of the Internal Revenue Code to use a tax year other than its required tax year. Free tax filing for seniors Certain restrictions apply to the election. Free tax filing for seniors A partnership or an S corporation that makes a section 444 election must make certain required payments and a PSC must make certain distributions (discussed later). Free tax filing for seniors The section 444 election does not apply to any partnership, S corporation, or PSC that establishes a business purpose for a different period, explained later. Free tax filing for seniors A partnership, S corporation, or PSC can make a section 444 election if it meets all the following requirements. Free tax filing for seniors It is not a member of a tiered structure (defined in section 1. Free tax filing for seniors 444-2T of the regulations). Free tax filing for seniors It has not previously had a section 444 election in effect. Free tax filing for seniors It elects a year that meets the deferral period requirement. Free tax filing for seniors Deferral period. Free tax filing for seniors   The determination of the deferral period depends on whether the partnership, S corporation, or PSC is retaining its tax year or adopting or changing its tax year with a section 444 election. Free tax filing for seniors Retaining tax year. Free tax filing for seniors   Generally, a partnership, S corporation, or PSC can make a section 444 election to retain its tax year only if the deferral period of the new tax year is 3 months or less. Free tax filing for seniors This deferral period is the number of months between the beginning of the retained year and the close of the first required tax year. Free tax filing for seniors Adopting or changing tax year. Free tax filing for seniors   If the partnership, S corporation, or PSC is adopting or changing to a tax year other than its required year, the deferral period is the number of months from the end of the new tax year to the end of the required tax year. Free tax filing for seniors The IRS will allow a section 444 election only if the deferral period of the new tax year is less than the shorter of: Three months, or The deferral period of the tax year being changed. Free tax filing for seniors This is the tax year immediately preceding the year for which the partnership, S corporation, or PSC wishes to make the section 444 election. Free tax filing for seniors If the partnership, S corporation, or PSC's tax year is the same as its required tax year, the deferral period is zero. Free tax filing for seniors Example 1. Free tax filing for seniors BD Partnership uses a calendar year, which is also its required tax year. Free tax filing for seniors BD cannot make a section 444 election because the deferral period is zero. Free tax filing for seniors Example 2. Free tax filing for seniors E, a newly formed partnership, began operations on December 1. Free tax filing for seniors E is owned by calendar year partners. Free tax filing for seniors E wants to make a section 444 election to adopt a September 30 tax year. Free tax filing for seniors E's deferral period for the tax year beginning December 1 is 3 months, the number of months between September 30 and December 31. Free tax filing for seniors Making the election. Free tax filing for seniors   Make a section 444 election by filing Form 8716 with the Internal Revenue Service Center where the entity will file its tax return. Free tax filing for seniors Form 8716 must be filed by the earlier of: The due date (not including extensions) of the income tax return for the tax year resulting from the section 444 election, or The 15th day of the 6th month of the tax year for which the election will be effective. Free tax filing for seniors For this purpose, count the month in which the tax year begins, even if it begins after the first day of that month. Free tax filing for seniors Note. Free tax filing for seniors If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. Free tax filing for seniors   Attach a copy of Form 8716 to Form 1065, Form 1120S, or Form 1120 for the first tax year for which the election is made. Free tax filing for seniors Example 1. Free tax filing for seniors AB, a partnership, begins operations on September 13, 2012, and is qualified to make a section 444 election to use a September 30 tax year for its tax year beginning September 13, 2012. Free tax filing for seniors AB must file Form 8716 by January 15, 2013, which is the due date of the partnership's tax return for the period from September 13, 2012, to September 30, 2012. Free tax filing for seniors Example 2. Free tax filing for seniors The facts are the same as in Example 1 except that AB begins operations on October 21, 2012. Free tax filing for seniors AB must file Form 8716 by March 17, 2013. Free tax filing for seniors Example 3. Free tax filing for seniors B is a corporation that first becomes a PSC for its tax year beginning September 1, 2012. Free tax filing for seniors B qualifies to make a section 444 election to use a September 30 tax year for its tax year beginning September 1, 2012. Free tax filing for seniors B must file Form 8716 by December 17, 2012, the due date of the income tax return for the short period from September 1, 2012, to September 30, 2012. Free tax filing for seniors Note. Free tax filing for seniors The due dates in Examples 2 and 3 are adjusted because the dates fall on a Saturday, Sunday or legal holiday. Free tax filing for seniors Extension of time for filing. Free tax filing for seniors   There is an automatic extension of 12 months to make this election. Free tax filing for seniors See the Form 8716 instructions for more information. Free tax filing for seniors Terminating the election. Free tax filing for seniors   The section 444 election remains in effect until it is terminated. Free tax filing for seniors If the election is terminated, another section 444 election cannot be made for any tax year. Free tax filing for seniors   The election ends when any of the following applies to the partnership, S corporation, or PSC. Free tax filing for seniors The entity changes to its required tax year. Free tax filing for seniors The entity liquidates. Free tax filing for seniors The entity becomes a member of a tiered structure. Free tax filing for seniors The IRS determines that the entity willfully failed to comply with the required payments or distributions. Free tax filing for seniors   The election will also end if either of the following events occur. Free tax filing for seniors An S corporation's S election is terminated. Free tax filing for seniors However, if the S corporation immediately becomes a PSC, the PSC can continue the section 444 election of the S corporation. Free tax filing for seniors A PSC ceases to be a PSC. Free tax filing for seniors If the PSC elects to be an S corporation, the S corporation can continue the election of the PSC. Free tax filing for seniors Required payment for partnership or S corporation. Free tax filing for seniors   A partnership or an S corporation must make a required payment for any tax year: The section 444 election is in effect. Free tax filing for seniors The required payment for that year (or any preceding tax year) is more than $500. Free tax filing for seniors    This payment represents the value of the tax deferral the owners receive by using a tax year different from the required tax year. Free tax filing for seniors   Form 8752, Required Payment or Refund Under Section 7519, must be filed each year the section 444 election is in effect, even if no payment is due. Free tax filing for seniors If the required payment is more than $500 (or the required payment for any prior year was more than $500), the payment must be made when Form 8752 is filed. Free tax filing for seniors If the required payment is $500 or less and no payment was required in a prior year, Form 8752 must be filed showing a zero amount. Free tax filing for seniors Applicable election year. Free tax filing for seniors   Any tax year a section 444 election is in effect, including the first year, is called an applicable election year. Free tax filing for seniors Form 8752 must be filed and the required payment made (or zero amount reported) by May 15th of the calendar year following the calendar year in which the applicable election year begins. Free tax filing for seniors Required distribution for PSC. Free tax filing for seniors   A PSC with a section 444 election in effect must distribute certain amounts to employee-owners by December 31 of each applicable year. Free tax filing for seniors If it fails to make these distributions, it may be required to defer certain deductions for amounts paid to owner-employees. Free tax filing for seniors The amount deferred is treated as paid or incurred in the following tax year. Free tax filing for seniors   For information on the minimum distribution, see the instructions for Part I of Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC). Free tax filing for seniors Back-up election. Free tax filing for seniors   A partnership, S corporation, or PSC can file a back-up section 444 election if it requests (or plans to request) permission to use a business purpose tax year, discussed later. Free tax filing for seniors If the request is denied, the back-up section 444 election must be activated (if the partnership, S corporation, or PSC otherwise qualifies). Free tax filing for seniors Making back-up election. Free tax filing for seniors   The general rules for making a section 444 election, as discussed earlier, apply. Free tax filing for seniors When filing Form 8716, type or print “BACK-UP ELECTION” at the top of the form. Free tax filing for seniors However, if Form 8716 is filed on or after the date Form 1128 (or Form 2553) is filed, type or print “FORM 1128 (or FORM 2553) BACK-UP ELECTION” at the top of Form 8716. Free tax filing for seniors Activating election. Free tax filing for seniors   A partnership or S corporation activates its back-up election by filing the return required and making the required payment with Form 8752. Free tax filing for seniors The due date for filing Form 8752 and making the payment is the later of the following dates. Free tax filing for seniors May 15 of the calendar year following the calendar year in which the applicable election year begins. Free tax filing for seniors 60 days after the partnership or S corporation has been notified by the IRS that the business year request has been denied. Free tax filing for seniors   A PSC activates its back-up election by filing Form 8716 with its original or amended income tax return for the tax year in which the election is first effective and printing on the top of the income tax return, “ACTIVATING BACK-UP ELECTION. Free tax filing for seniors ” 52-53-Week Tax Year A partnership, S corporation, or PSC can use a tax year other than its required tax year if it elects a 52-53-week tax year (discussed earlier) that ends with reference to either its required tax year or a tax year elected under section 444 (discussed earlier). Free tax filing for seniors A newly formed partnership, S corporation, or PSC can adopt a 52-53-week tax year ending with reference to either its required tax year or a tax year elected under section 444 without IRS approval. Free tax filing for seniors However, if the entity wishes to change to a 52-53-week tax year or change from a 52-53-week tax year that references a particular month to a non-52-53-week tax year that ends on the last day of that month, it must request IRS approval by filing Form 1128. Free tax filing for seniors Business Purpose Tax Year A partnership, S corporation, or PSC establishes the business purpose for a tax year by filing Form 1128. Free tax filing for seniors See the Instructions for Form 1128 for details. Free tax filing for seniors Corporations (Other Than S Corporations and PSCs) A new corporation establishes its tax year when it files its first tax return. Free tax filing for seniors A newly reactivated corporation that has been inactive for a number of years is treated as a new taxpayer for the purpose of adopting a tax year. Free tax filing for seniors An S corporation or a PSC must use the required tax year rules, discussed earlier, to establish a tax year. Free tax filing for seniors Generally, a corporation that wants to change its tax year must obtain approval from the IRS under either the: (a) automatic approval procedures; or (b) ruling request procedures. Free tax filing for seniors See the Instructions for Form 1128 for details. Free tax filing for seniors Accounting Methods An accounting method is a set of rules used to determine when income and expenses are reported on your tax return. Free tax filing for seniors Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. Free tax filing for seniors You choose an accounting method when you file your first tax return. Free tax filing for seniors If you later want to change your accounting method, you must get IRS approval. Free tax filing for seniors See Change in Accounting Method, later. Free tax filing for seniors No single accounting method is required of all taxpayers. Free tax filing for seniors You must use a system that clearly reflects your income and expenses and you must maintain records that will enable you to file a correct return. Free tax filing for seniors In addition to your permanent accounting books, you must keep any other records necessary to support the entries on your books and tax returns. Free tax filing for seniors You must use the same accounting method from year to year. Free tax filing for seniors An accounting method clearly reflects income only if all items of gross income and expenses are treated the same from year to year. Free tax filing for seniors If you do not regularly use an accounting method that clearly reflects your income, your income will be refigured under the method that, in the opinion of the IRS, does clearly reflect income. Free tax filing for seniors Methods you can use. Free tax filing for seniors   In general, you can compute your taxable income under any of the following accounting methods. Free tax filing for seniors Cash method. Free tax filing for seniors Accrual method. Free tax filing for seniors Special methods of accounting for certain items of income and expenses. Free tax filing for seniors A hybrid method which combines elements of two or more of the above accounting methods. Free tax filing for seniors The cash and accrual methods of accounting are explained later. Free tax filing for seniors Special methods. Free tax filing for seniors   This publication does not discuss special methods of accounting for certain items of income or expenses. Free tax filing for seniors For information on reporting income using one of the long-term contract methods, see section 460 of the Internal Revenue Code and the related regulations. Free tax filing for seniors The following publications also discuss special methods of reporting income or expenses. Free tax filing for seniors Publication 225, Farmer's Tax Guide. Free tax filing for seniors Publication 535, Business Expenses. Free tax filing for seniors Publication 537, Installment Sales. Free tax filing for seniors Publication 946, How To Depreciate Property. Free tax filing for seniors Hybrid method. Free tax filing for seniors   Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly reflects your income and you use it consistently. Free tax filing for seniors However, the following restrictions apply. Free tax filing for seniors If an inventory is necessary to account for your income, you must use an accrual method for purchases and sales. Free tax filing for seniors See Exceptions under Inventories, later. Free tax filing for seniors Generally, you can use the cash method for all other items of income and expenses. Free tax filing for seniors See Inventories, later. Free tax filing for seniors If you use the cash method for reporting your income, you must use the cash method for reporting your expenses. Free tax filing for seniors If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Free tax filing for seniors Any combination that includes the cash method is treated as the cash method for purposes of section 448 of the Internal Revenue Code. Free tax filing for seniors Business and personal items. Free tax filing for seniors   You can account for business and personal items using different accounting methods. Free tax filing for seniors For example, you can determine your business income and expenses under an accrual method, even if you use the cash method to figure personal items. Free tax filing for seniors Two or more businesses. Free tax filing for seniors   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. Free tax filing for seniors No business is separate and distinct, unless a complete and separate set of books and records is maintained for each business. Free tax filing for seniors Note. Free tax filing for seniors If you use different accounting methods to create or shift profits or losses between businesses (for example, through inventory adjustments, sales, purchases, or expenses) so that income is not clearly reflected, the businesses will not be considered separate and distinct. Free tax filing for seniors Cash Method Most individuals and many small businesses use the cash method of accounting. Free tax filing for seniors Generally, if you produce, purchase, or sell merchandise, you must keep an inventory and use an accrual method for sales and purchases of merchandise. Free tax filing for seniors See Inventories, later, for exceptions to this rule. Free tax filing for seniors Income Under the cash method, you include in your gross income all items of income you actually or constructively receive during the tax year. Free tax filing for seniors If you receive property and services, you must include their fair market value (FMV) in income. Free tax filing for seniors Constructive receipt. Free tax filing for seniors   Income is constructively received when an amount is credited to your account or made available to you without restriction. Free tax filing for seniors You need not have possession of it. Free tax filing for seniors If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Free tax filing for seniors Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations. Free tax filing for seniors Example. Free tax filing for seniors You are a calendar year taxpayer. Free tax filing for seniors Your bank credited, and made available, interest to your bank account in December 2012. Free tax filing for seniors You did not withdraw it or enter it into your books until 2013. Free tax filing for seniors You must include the amount in gross income for 2012, the year you constructively received it. Free tax filing for seniors You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. Free tax filing for seniors You must report the income in the year the property is received or made available to you without restriction. Free tax filing for seniors Expenses Under the cash method, generally, you deduct expenses in the tax year in which you actually pay them. Free tax filing for seniors This includes business expenses for which you contest liability. Free tax filing for seniors However, you may not be able to deduct an expense paid in advance. Free tax filing for seniors Instead, you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Free tax filing for seniors Expense paid in advance. Free tax filing for seniors   An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. Free tax filing for seniors   Under the 12-month rule, a taxpayer is not required to capitalize amounts paid to create certain rights or benefits for the taxpayer that do not extend beyond the earlier of the following. Free tax filing for seniors 12 months after the right or benefit begins, or The end of the tax year after the tax year in which payment is made. Free tax filing for seniors   If you have not been applying the general rule (an expense paid in advance is deductible only in the year to which it applies) and/or the 12-month rule to the expenses you paid in advance, you must obtain approval from the IRS before using the general rule and/or the 12-month rule. Free tax filing for seniors See Change in Accounting Method, later. Free tax filing for seniors Example 1. Free tax filing for seniors You are a calendar year taxpayer and pay $3,000 in 2012 for a business insurance policy that is effective for three years (36 months), beginning on July 1, 2012. Free tax filing for seniors The general rule that an expense paid in advance is deductible only in the year to which it applies is applicable to this payment because the payment does not qualify for the 12-month rule. Free tax filing for seniors Therefore, only $500 (6/36 x $3,000) is deductible in 2012, $1,000 (12/36 x $3,000) is deductible in 2013, $1,000 (12/36 x $3,000) is deductible in 2014, and the remaining $500 is deductible in 2015. Free tax filing for seniors Example 2. Free tax filing for seniors You are a calendar year taxpayer and pay $10,000 on July 1, 2012, for a business insurance policy that is effective for only one year beginning on July 1, 2012. Free tax filing for seniors The 12-month rule applies. Free tax filing for seniors Therefore, the full $10,000 is deductible in 2012. Free tax filing for seniors Excluded Entities The following entities cannot use the cash method, including any combination of methods that includes the cash method. Free tax filing for seniors (See Special rules for farming businesses, later. Free tax filing for seniors ) A corporation (other than an S corporation) with average annual gross receipts exceeding $5 million. Free tax filing for seniors See Gross receipts test, below. Free tax filing for seniors A partnership with a corporation (other than an S corporation) as a partner, and with the partnership having average annual gross receipts exceeding $5 million. Free tax filing for seniors See Gross receipts test, below. Free tax filing for seniors A tax shelter. Free tax filing for seniors Exceptions The following entities are not prohibited from using the cash method of accounting. Free tax filing for seniors Any corporation or partnership, other than a tax shelter, that meets the gross receipts test for all tax years after 1985. Free tax filing for seniors A qualified personal service corporation (PSC). Free tax filing for seniors Gross receipts test. Free tax filing for seniors   A corporation or partnership, other than a tax shelter, that meets the gross receipts test can generally use the cash method. Free tax filing for seniors A corporation or a partnership meets the test if, for each prior tax year beginning after 1985, its average annual gross receipts are $5 million or less. Free tax filing for seniors    An entity's average annual gross receipts for a prior tax year is determined by: Adding the gross receipts for that tax year and the 2 preceding tax years; and Dividing the total by 3. Free tax filing for seniors See Gross receipts test for qualifying taxpayers, for more information. Free tax filing for seniors Generally, a partnership applies the test at the partnership level. Free tax filing for seniors Gross receipts for a short tax year are annualized. Free tax filing for seniors Aggregation rules. Free tax filing for seniors   Organizations that are members of an affiliated service group or a controlled group of corporations treated as a single employer for tax purposes are required to aggregate their gross receipts to determine whether the gross receipts test is met. Free tax filing for seniors Change to accrual method. Free tax filing for seniors   A corporation or partnership that fails to meet the gross receipts test for any tax year is prohibited from using the cash method and must change to an accrual method of accounting, effective for the tax year in which the entity fails to meet this test. Free tax filing for seniors Special rules for farming businesses. Free tax filing for seniors   Generally, a taxpayer engaged in the trade or business of farming is allowed to use the cash method for its farming business. Free tax filing for seniors However, certain corporations (other than S corporations) and partnerships that have a partner that is a corporation must use an accrual method for their farming business. Free tax filing for seniors For this purpose, farming does not include the operation of a nursery or sod farm or the raising or harvesting of trees (other than fruit and nut trees). Free tax filing for seniors   There is an exception to the requirement to use an accrual method for corporations with gross receipts of $1 million or less for each prior tax year after 1975. Free tax filing for seniors For family corporations engaged in farming, the exception applies if gross receipts were $25 million or less for each prior tax year after 1985. Free tax filing for seniors See chapter 2 of Publication 225, Farmer's Tax Guide, for more information. Free tax filing for seniors Qualified PSC. Free tax filing for seniors   A PSC that meets the following function and ownership tests can use the cash method. Free tax filing for seniors Function test. Free tax filing for seniors   A corporation meets the function test if at least 95% of its activities are in the performance of services in the fields of health, veterinary services, law, engineering (including surveying and mapping), architecture, accounting, actuarial science, performing arts, or consulting. Free tax filing for seniors Ownership test. Free tax filing for seniors   A corporation meets the ownership test if at least 95% of its stock is owned, directly or indirectly, at all times during the year by one or more of the following. Free tax filing for seniors Employees performing services for the corporation in a field qualifying under the function test. Free tax filing for seniors Retired employees who had performed services in those fields. Free tax filing for seniors The estate of an employee described in (1) or (2). Free tax filing for seniors Any other person who acquired the stock by reason of the death of an employee referred to in (1) or (2), but only for the 2-year period beginning on the date of death. Free tax filing for seniors   Indirect ownership is generally taken into account if the stock is owned indirectly through one or more partnerships, S corporations, or qualified PSCs. Free tax filing for seniors Stock owned by one of these entities is considered owned by the entity's owners in proportion to their ownership interest in that entity. Free tax filing for seniors Other forms of indirect stock ownership, such as stock owned by family members, are generally not considered when determining if the ownership test is met. Free tax filing for seniors   For purposes of the ownership test, a person is not considered an employee of a corporation unless that person performs more than minimal services for the corporation. Free tax filing for seniors Change to accrual method. Free tax filing for seniors   A corporation that fails to meet the function test for any tax year; or fails to meet the ownership test at any time during any tax year must change to an accrual method of accounting, effective for the year in which the corporation fails to meet either test. Free tax filing for seniors A corporation that fails to meet the function test or the ownership test is not treated as a qualified PSC for any part of that tax year. Free tax filing for seniors Accrual Method Under the accrual method of accounting, generally you report income in the year it is earned and deduct or capitalize expenses in the year incurred. Free tax filing for seniors The purpose of an accrual method of accounting is to match income and expenses in the correct year. Free tax filing for seniors Income Generally, you include an amount in 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 tax filing for seniors Under this rule, you report an amount in your gross income on the earliest of the following dates. Free tax filing for seniors When you receive payment. Free tax filing for seniors When the income amount is due to you. Free tax filing for seniors When you earn the income. Free tax filing for seniors When title has passed. Free tax filing for seniors Estimated income. Free tax filing for seniors   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 you make that determination. Free tax filing for seniors Change in payment schedule. Free tax filing for seniors   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 reduced rate. Free tax filing for seniors Continue this procedure until you complete the services, then account for the difference. Free tax filing for seniors Advance Payment for Services 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 tax filing for seniors 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 tax filing for seniors However, you cannot postpone including any payment beyond that tax year. Free tax filing for seniors Service agreement. Free tax filing for seniors   You can postpone reporting income from an advance payment you receive for a service agreement on property you sell, lease, build, install, or construct. Free tax filing for seniors This includes an agreement providing for incidental replacement of parts or materials. Free tax filing for seniors However, this applies only if you offer the property without a service agreement in the normal course of business. Free tax filing for seniors Postponement not allowed. Free tax filing for seniors   Generally, one cannot postpone including an advance payment in income for services if either of the following applies. Free tax filing for seniors You are to perform any part of the service after the end of the tax year immediately following the year you receive the advance payment. Free tax filing for seniors You are to perform any part of the service at any unspecified future date that may be after the end of the tax year immediately following the year you receive the advance payment. Free tax filing for seniors Examples. Free tax filing for seniors   In each of the following examples, assume the tax year is a calendar year and that the accrual method of accounting is used. Free tax filing for seniors Example 1. Free tax filing for seniors You manufacture, sell, and service computers. Free tax filing for seniors You received payment in 2012 for a one-year contingent service contract on a computer you sold. Free tax filing for seniors You can postpone including in income the part of the payment you did not earn in 2012 if, in the normal course of your business, you offer computers for sale without a contingent service contract. Free tax filing for seniors Example 2. Free tax filing for seniors You are in the television repair business. Free tax filing for seniors You received payments in 2012 for one-year contracts under which you agree to repair or replace certain parts that fail to function properly in television sets manufactured and sold by unrelated parties. Free tax filing for seniors You include the payments in gross income as you earn them. Free tax filing for seniors Example 3. Free tax filing for seniors You own a dance studio. Free tax filing for seniors On October 1, 2012, you receive payment for a one-year contract for 48 one-hour lessons beginning on that date. Free tax filing for seniors You give eight lessons in 2012. Free tax filing for seniors Under this method of including advance payments, you must include one-sixth (8/48) of the payment in income for 2012, and five-sixths (40/48) of the payment in 2013, even if you do not give all the lessons by the end of 2013. Free tax filing for seniors Example 4. Free tax filing for seniors Assume the same facts as in Example 3, except the payment is for a two-year contract for 96 lessons. Free tax filing for seniors You must include the entire payment in income in 2012 since part of the services may be performed after the following year. Free tax filing for seniors Guarantee or warranty. Free tax filing for seniors   Generally, you cannot postpone reporting income you receive under a guarantee or warranty contract. Free tax filing for seniors Prepaid rent. Free tax filing for seniors   You cannot postpone reporting income from prepaid rent. Free tax filing for seniors Prepaid rent does not include payment for the use of a room or other space when significant service is also provided for the occupant. Free tax filing for seniors You provide significant service when you supply space in a hotel, boarding house, tourist home, motor court, motel, or apartment house that furnishes hotel services. Free tax filing for seniors Books and records. Free tax filing for seniors   Any advance payment you include in gross receipts on your tax return for the year you receive payment must not be less than the payment you include in income for financial reports under the method of accounting used for those reports. Free tax filing for seniors Financial reports include reports to shareholders, partners, beneficiaries, and other proprietors for credit purposes and consolidated financial statements. Free tax filing for seniors IRS approval. Free tax filing for seniors   You must file Form 3115 to obtain IRS approval to change your method of accounting for advance payment for services. Free tax filing for seniors Advance Payment for Sales Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods held primarily for sale to customers in the ordinary course of your trade or business. Free tax filing for seniors However, the rules do not apply to a payment (or part of a payment) for services that are not an integral part of the main activities covered under the agreement. Free tax filing for seniors An agreement includes a gift certificate that can be redeemed for goods. Free tax filing for seniors Amounts due and payable are considered received. Free tax filing for seniors How to report payments. Free tax filing for seniors   Generally, include an advance payment in income in the year in which you receive it. Free tax filing for seniors However, you can use the alternative method, discussed next. Free tax filing for seniors Alternative method of reporting. Free tax filing for seniors   Under the alternative method, generally include an advance payment in income in the earlier tax year in which you: Include advance payments in gross receipts under the method of accounting you use for tax purposes, or Include any part of advance payments in income for financial reports under the method of accounting used for those reports. Free tax filing for seniors Financial reports include reports to shareholders, partners, beneficiaries, and other proprietors for credit purposes and consolidated financial statements. Free tax filing for seniors Example 1. Free tax filing for seniors You are a retailer. Free tax filing for seniors You use an accrual method of accounting and account for the sale of goods when you ship the goods. Free tax filing for seniors You use this method for both tax and financial reporting purposes. Free tax filing for seniors You can include advance payments in gross receipts for tax purposes in either: (a) the tax year in which you receive the payments; or (b) the tax year in which you ship the goods. Free tax filing for seniors However, see Exception for inventory goods, later. Free tax filing for seniors Example 2. Free tax filing for seniors You are a calendar year taxpayer. Free tax filing for seniors You manufacture household furniture and use an accrual method of accounting. Free tax filing for seniors Under this method, you accrue income for your financial reports when you ship the furniture. Free tax filing for seniors For tax purposes, you do not accrue income until the furniture has been delivered and accepted. Free tax filing for seniors In 2012, you received an advance payment of $8,000 for an order of furniture to be manufactured for a total price of $20,000. Free tax filing for seniors You shipped the furniture to the customer in December 2012, but it was not delivered and accepted until January 2013. Free tax filing for seniors For tax purposes, you include the $8,000 advance payment in gross income for 2012; and include the remaining $12,000 of the contract price in gross income for 2013. Free tax filing for seniors Information schedule. Free tax filing for seniors   If you use the alternative method of reporting advance payments, you must attach a statement with the following information to your tax return each year. Free tax filing for seniors Total advance payments received in the current tax year. Free tax filing for seniors Total advance payments received in earlier tax years and not included in income before the current tax year. Free tax filing for seniors Total payments received in earlier tax years included in income for the current tax year. Free tax filing for seniors Exception for inventory goods. Free tax filing for seniors   If you have an agreement to sell goods properly included in inventory, you can postpone including the advance payment in income until the end of the second tax year following the year you receive an advance payment if, on the last day of the tax year, you meet the following requirements. Free tax filing for seniors You account for the advance payment under the alternative method (discussed earlier). Free tax filing for seniors You have received a substantial advance payment on the agreement (discussed next). Free tax filing for seniors You have enough substantially similar goods on hand, or available through your normal source of supply, to satisfy the agreement. Free tax filing for seniors These rules also apply to an agreement, such as a gift certificate, that can be satisfied with goods that cannot be identified in the tax year you receive an advance payment. Free tax filing for seniors   If you meet these conditions, all advance payments you receive by the end of the second tax year, including payments received in prior years but not reported, must be included in income by the second tax year following the tax year of receipt of substantial advance payments. Free tax filing for seniors You must also deduct in that second year all actual or estimated costs for the goods required to satisfy the agreement. Free tax filing for seniors If you estimated the cost, you must take into account any difference between the estimate and the actual cost when the goods are delivered. Free tax filing for seniors Note. Free tax filing for seniors You must report any advance payments you receive after the second year in the year received. Free tax filing for seniors No further deferral is allowed. Free tax filing for seniors Substantial advance payments. Free tax filing for seniors   Under an agreement for a future sale, you have substantial advance payments if, by the end of the tax year, the total advance payments received during that year and preceding tax years are equal to or more than the total costs reasonably estimated to be includible in inventory because of the agreement. Free tax filing for seniors Example. Free tax filing for seniors You are a calendar year, accrual method taxpayer who accounts for advance payments under the alternative method. Free tax filing for seniors In 2008, you entered into a contract for the sale of goods properly includible in your inventory. Free tax filing for seniors The total contract price is $50,000 and you estimate that your total inventoriable costs for the goods will be $25,000. Free tax filing for seniors You receive the following advance payments under the contract. Free tax filing for seniors 2009 $17,500 2010 10,000 2011 7,500 2012 5,000 2013 5,000 2014 5,000 Total contract price $50,000   Your customer asked you to deliver the goods in 2015. Free tax filing for seniors In your 2010 closing inventory, you had on hand enough of the type of goods specified in the contract to satisfy the contract. Free tax filing for seniors Since the advance payments you had received by the end of 2010 were more than the costs you estimated, the payments are substantial advance payments. Free tax filing for seniors   For 2012, include in income all payments you received by the end of 2012, the second tax year following the tax year in which you received substantial advance payments. Free tax filing for seniors You must include $40,000 in sales for 2012 (the total amounts received from 2009 through 2012) and include in inventory the cost of the goods (or similar goods) on hand. Free tax filing for seniors If no such goods are on hand, then estimate the cost necessary to satisfy the contract. Free tax filing for seniors   No further deferral is allowed. Free tax filing for seniors You must include in gross income the advance payment you receive each remaining year of the contract. Free tax filing for seniors Take into account the difference between any estimated cost of goods sold and the actual cost when you deliver the goods in 2015. Free tax filing for seniors IRS approval. Free tax filing for seniors   You must file Form 3115 to obtain IRS approval to change your method of accounting for advance payments for sales. Free tax filing for seniors Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Free tax filing for seniors The all-events test has been met. Free tax filing for seniors The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Free tax filing for seniors Economic performance has occurred. Free tax filing for seniors Economic Performance Generally, you cannot deduct or capitalize a business expense until economic performance occurs. Free tax filing for seniors 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 the property is used. Free tax filing for seniors If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Free tax filing for seniors Example. Free tax filing for seniors You are a calendar year taxpayer. Free tax filing for seniors You buy office supplies in December 2012. Free tax filing for seniors You receive the supplies and the bill in December, but you pay the bill in January 2013. Free tax filing for seniors You can deduct the expense in 2012 because all events have occurred to fix the liability, the amount of the liability can be determined, and economic performance occurred in 2012. Free tax filing for seniors Your office supplies may qualify as a recurring item, discussed later. Free tax filing for seniors If so, you can deduct them in 2012, even if the supplies are not delivered until 2013 (when economic performance occurs). Free tax filing for seniors Workers' compensation and tort liability. Free tax filing for seniors   If you are required to make payments under workers' compensation laws or in satisfaction of any tort liability, economic performance occurs as you make the payments. Free tax filing for seniors If you are required to make payments to a special designated settlement fund established by court order for a tort liability, economic performance occurs as you make the payments. Free tax filing for seniors Taxes. Free tax filing for seniors   Economic performance generally occurs as estimated income tax, property taxes, employment taxes, etc. Free tax filing for seniors are paid. Free tax filing for seniors However, you can elect to treat taxes as a recurring item, discussed later. Free tax filing for seniors You can also elect to ratably accrue real estate taxes. Free tax filing for seniors See chapter 5 of Publication 535 for information about real estate taxes. Free tax filing for seniors Other liabilities. Free tax filing for seniors   Other liabilities for which economic performance occurs as you make payments include liabilities for breach of contract (to the extent of incidental, consequential, and liquidated damages), violation of law, rebates and refunds, awards, prizes, jackpots, insurance, and warranty and service contracts. Free tax filing for seniors Interest. Free tax filing for seniors   Economic performance occurs with the passage of time (as the borrower uses, and the lender forgoes use of, the lender's money) rather than as payments are made. Free tax filing for seniors Compensation for services. Free tax filing for seniors   Generally, economic performance occurs as an employee renders service to the employer. Free tax filing for seniors However, deductions for compensation or other benefits paid to an employee in a year subsequent to economic performance are subject to the rules governing deferred compensation, deferred benefits, and funded welfare benefit plans. Free tax filing for seniors For information on employee benefit programs, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Free tax filing for seniors Vacation pay. Free tax filing for seniors   You can take a current deduction for vacation pay earned by your employees if you pay it during the year or, if the amount is vested, within 2½ months after the end of the year. Free tax filing for seniors If you pay it later than this, you must deduct it in the year actually paid. Free tax filing for seniors An amount is vested if your right to it cannot be nullified or cancelled. Free tax filing for seniors Exception for recurring items. Free tax filing for seniors   An exception to the economic performance rule allows certain recurring items to be treated as incurred during the tax year even though economic performance has not occurred. Free tax filing for seniors The exception applies if all the following requirements are met. Free tax filing for seniors The all-events test, discussed earlier, is met. Free tax filing for seniors Economic performance occurs by the earlier of the following dates. Free tax filing for seniors 8½ months after the close of the year. Free tax filing for seniors The date you file a timely return (including extensions) for the year. Free tax filing for seniors The item is recurring in nature and you consistently treat similar items as incurred in the tax year in which the all-events test is met. Free tax filing for seniors Either: The item is not material, or Accruing the item in the year in which the all-events test is met results in a better match against income than accruing the item in the year of economic performance. Free tax filing for seniors This exception does not apply to workers' compensation or tort liabilities. Free tax filing for seniors Amended return. Free tax filing for seniors   You may be able to file an amended return and treat a liability as incurred under the recurring item exception. Free tax filing for seniors You can do so if economic performance for the liability occurs after you file your tax return for the year, but within 8½ months after the close of the tax year. Free tax filing for seniors Recurrence and consistency. Free tax filing for seniors   To determine whether an item is recurring and consistently reported, consider the frequency with which the item and similar items are incurred (or expected to be incurred) and how you report these items for tax purposes. Free tax filing for seniors A new expense or an expense not incurred every year can be treated as recurring if it is reasonable to expect that it will be incurred regularly in the future. Free tax filing for seniors Materiality. Free tax filing for seniors   Factors to consider in determining the materiality of a recurring item include the size of the item (both in absolute terms and in relation to your income and other expenses) and the treatment of the item on your financial statements. Free tax filing for seniors   An item considered material for financial statement purposes is also considered material for tax purposes. Free tax filing for seniors However, in certain situations an immaterial item for financial accounting purposes is treated as material for purposes of economic performance. Free tax filing for seniors Matching expenses with income. Free tax filing for seniors   Costs directly associated with the revenue of a period are properly allocable to that period. Free tax filing for seniors To determine whether the accrual of an expense in a particular year results in a better match with the income to which it relates, generally accepted accounting principles (GAAP; visit www. Free tax filing for seniors fasab. Free tax filing for seniors gov/accepted. Free tax filing for seniors html) are an important factor. Free tax filing for seniors   For example, if you report sales income in the year of sale, but you do not ship the goods until the following year, the shipping costs are more properly matched to income in the year of sale than the year the goods are shipped. Free tax filing for seniors Expenses that cannot be practically associated with income of a particular period, such as advertising costs, should be assigned to the period the costs are incurred. Free tax filing for seniors However, the matching requirement is considered met for certain types of expenses. Free tax filing for seniors These expenses include taxes, payments under insurance, warranty, and service contracts, rebates, refunds, awards, prizes, and jackpots. Free tax filing for seniors Expenses Paid in Advance An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. Free tax filing for seniors Under the 12-month rule, a taxpayer is not required to capitalize amounts paid to create certain rights or benefits for the taxpayer that do not extend beyond the earlier of the following. Free tax filing for seniors 12 months after the right or benefit begins, or The end of the tax year after the tax year in which payment is made. Free tax filing for seniors If you have not been applying the general rule (an expense paid in advance is deductible only in the year to which it applies) and/or the 12-month rule to the expenses you paid in advance, you must get IRS approval before using the general rule and/or the 12-month rule. Free tax filing for seniors See Change in Accounting Method, later, for information on how to get IRS approval. Free tax filing for seniors See Expense paid in advance under Cash Method, earlier, for examples illustrating the application of the general and 12-month rules. Free tax filing for seniors Related Persons Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. Free tax filing for seniors 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 tax filing for seniors See section 267 of the Internal Revenue Code and Publication 542, Corporations, for the definition of related person. Free tax filing for seniors Inventories An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. Free tax filing for seniors If you must account for an inventory in your business, you must use an accrual method of accounting for your purchases and sales. Free tax filing for seniors However, see Exceptions, next. Free tax filing for seniors See also Accrual Method, earlier. Free tax filing for seniors To figure taxable income, you must value your inventory at the beginning and end of each tax year. Free tax filing for seniors To determine the value, you need a method for identifying the items in your inventory and a method for valuing these items. Free tax filing for seniors See Identifying Cost and Valuing Inventory, later. Free tax filing for seniors The rules for valuing inventory are not the same for all businesses. Free tax filing for seniors The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Free tax filing for seniors Your inventory practices must be consistent from year to year. Free tax filing for seniors The rules discussed here apply only if they do not conflict with the uniform capitalization rules of section 263A and the mark-to-market rules of section 475. Free tax filing for seniors Exceptions The following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Free tax filing for seniors These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Free tax filing for seniors A qualifying taxpayer under Revenue Procedure 2001-10 on page 272 of Internal Revenue Bulletin 2001-2, available at www. Free tax filing for seniors irs. Free tax filing for seniors gov/pub/irs-irbs/irb01–02. Free tax filing for seniors pdf. Free tax filing for seniors A qualifying small business taxpayer under Revenue Procedure 2002-28, on page 815 of Internal Revenue Bulletin 2002-18, available at www. Free tax filing for seniors irs. Free tax filing for seniors gov/pub/irs-irbs/irb02–18. Free tax filing for seniors pdf. Free tax filing for seniors In addition to the information provided in this publication, you should see the revenue procedures referenced in the list, above, and the instructions for Form 3115 for information you will need to adopt or change to these accounting methods (see Changing methods, later). Free tax filing for seniors Qualifying taxpayer. Free tax filing for seniors   You are a qualifying taxpayer under Revenue Procedure 2001-10 only if: You satisfy the gross receipts test for each prior tax year ending on or after December 17, 1998 (see Gross receipts test for qualifying taxpayers, next). Free tax filing for seniors Your average annual gross receipts for each test year (explained in Step 1, listed next) must be $1 million or less. Free tax filing for seniors You are not a tax shelter as defined under section 448(d)(3) of the Internal Revenue Code. Free tax filing for seniors Gross receipts test for qualifying taxpayers. Free tax filing for seniors   To determine if you meet the gross receipts test for qualifying taxpayers, use the following steps: Step 1. Free tax filing for seniors List each of the test years. Free tax filing for seniors For qualifying taxpayers under Revenue Procedure 2001-10, the test years are each prior tax year ending on or after December 17, 1998. Free tax filing for seniors Step 2. Free tax filing for seniors Determine your average annual gross receipts for each test year listed in Step 1. Free tax filing for seniors Your average annual gross receipts for a tax year is determined by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Free tax filing for seniors Step 3. Free tax filing for seniors You meet the gross receipts test for qualifying taxpayers if your average annual gross receipts for each test year listed in Step 1 is $1 million or less. Free tax filing for seniors Qualifying small business taxpayer. Free tax filing for seniors   You are a qualifying small business taxpayer under Revenue Procedure 2002-28 only if: You satisfy the gross receipts test for each prior tax year ending on or after December 31, 2000 (see Gross receipts test for qualifying small business taxpayers, next). Free tax filing for seniors Your average annual gross receipts for each test year (explained in Step 1, listed next) must be $10 million or less. Free tax filing for seniors You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Free tax filing for seniors Your principle business activity is an eligible business. Free tax filing for seniors See Eligible business, later. Free tax filing for seniors You have not changed (or have not been required to change) from the cash method because you became ineligible to use the cash method under Revenue Procedure 2002-28. Free tax filing for seniors Note. Free tax filing for seniors Revenue Procedure 2002-28 does not apply to a farming business of a qualifying small business taxpayer. Free tax filing for seniors A taxpayer engaged in the trade or business of farming generally is allowed to use the cash method for any farming business. Free tax filing for seniors See Special rules for farming businesses under Cash Method, earlier. Free tax filing for seniors Gross receipts test for qualifying small business taxpayers. Free tax filing for seniors   To determine if you meet the gross receipts test for qualifying small business taxpayers, use the following steps: Step 1. Free tax filing for seniors List each of the test years. Free tax filing for seniors For qualifying small business taxpayers under Revenue Procedure 2002-28, the test years are each prior tax year ending on or after December 31, 2000. Free tax filing for seniors Step 2. Free tax filing for seniors Determine your average annual gross receipts for each test year listed in Step 1. Free tax filing for seniors Your average annual gross receipts for a tax year is determined by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Free tax filing for seniors Step 3. Free tax filing for seniors You meet the gross receipts test for qualifying small business taxpayers if your average annual gross receipts for each test year listed in Step 1 is $10 million or less. Free tax filing for seniors Eligible business. Free tax filing for seniors   An eligible business is any business for which a qualified small business taxpayer can use the cash method and choose to not keep an inventory. Free tax filing for seniors You have an eligible business if you meet any of the following requirements. Free tax filing for seniors Your principal business activity is described in a North American Industry Classification System (NAICS) code other than any of the following NAICS subsector codes: NAICS codes 211 and 212 (mining activities). Free tax filing for seniors NAICS codes 31-33 (manufacturing). Free tax filing for seniors NAICS code 42 (wholesale trade). Free tax filing for seniors NAICS codes 44-45 (retail trade). Free tax filing for seniors NAICS codes 5111 and 5122 (information industries). Free tax filing for seniors Your principal business activity is the provision of services, including the provision of property incident to those services. Free tax filing for seniors Your principal business activity is the fabrication or modification of tangible personal property upon demand in accordance with customer design or specifications. Free tax filing for seniors   Information about the NAICS codes can be found at http://www. Free tax filing for seniors census. Free tax filing for seniors gov/naics or in the instructions for your federal income tax return. Free tax filing for seniors Gross receipts. Free tax filing for seniors   In general, gross receipts must include all receipts from all your trades or businesses that must be recognized under the method of accounting you used for that tax year for federal income tax purposes. Free tax filing for seniors See the definit