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H&r Block 1040ez

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H&r Block 1040ez

H&r block 1040ez 13. H&r block 1040ez   Payment of Taxes Table of Contents How To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule Generally, semimonthly deposits of excise taxes are required. H&r block 1040ez A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period). H&r block 1040ez However, no deposit is required for the situations listed below; the taxes are payable with Form 720. H&r block 1040ez The net liability for taxes listed in Part I (Form 720) does not exceed $2,500 for the quarter. H&r block 1040ez The gas guzzler tax is being paid on a one-time filing. H&r block 1040ez The liability is for taxes listed in Part II (Form 720), except for the floor stocks tax which generally requires a single deposit. H&r block 1040ez How To Make Deposits Electronic deposit requirement. H&r block 1040ez   You must use electronic funds transfer to make excise tax deposits. H&r block 1040ez Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). H&r block 1040ez If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. H&r block 1040ez Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. H&r block 1040ez   EFTPS is a free service provided by the Department of Treasury. H&r block 1040ez Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. H&r block 1040ez To get more information about EFTPS or to enroll in EFTPS, visit www. H&r block 1040ez eftps. H&r block 1040ez gov or call 1-800-555-4477. H&r block 1040ez Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. H&r block 1040ez    Depositing on time. H&r block 1040ez For EFTPS deposits to be on time, you must initiate the transaction at least 1 day before the date the deposit is due (before 8:00 p. H&r block 1040ez m. H&r block 1040ez Eastern time). H&r block 1040ez You will automatically be enrolled in EFTPS when you apply for an EIN. H&r block 1040ez You will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN. H&r block 1040ez When To Make Deposits There are two methods for determining deposits: the regular method and the alternative method. H&r block 1040ez The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. H&r block 1040ez See Alternative method below. H&r block 1040ez If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period. H&r block 1040ez Regular method. H&r block 1040ez   The deposit of tax for a semimonthly period is due by the 14th day following that period. H&r block 1040ez Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. H&r block 1040ez If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday. H&r block 1040ez Alternative method (IRS Nos. H&r block 1040ez 22, 26, 27, and 28). H&r block 1040ez   Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. H&r block 1040ez Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. H&r block 1040ez The deposit of tax is due by the 3rd banking day after the 7th day of that period. H&r block 1040ez   For an example of the alternative method, see the Instructions for Form 720. H&r block 1040ez To use the alternative method, you must keep a separate account of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. H&r block 1040ez For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year. H&r block 1040ez The separate account for each month must reflect: All items of tax included in amounts billed or tickets sold during the month, and Other items of adjustment relating to tax for prior months (within the statute of limitations on credits or refunds). H&r block 1040ez The separate account for any month cannot include an adjustment resulting from a refusal to pay or inability to collect unless the refusal has been reported to the IRS. H&r block 1040ez See Uncollected Tax Report in chapter 4. H&r block 1040ez The net amount of tax that is considered collected during the semimonthly period must be either: The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month, or One-half of the net amount of tax reflected in the separate account for the preceding month. H&r block 1040ez Special rule for deposits of taxes in September. H&r block 1040ez   See the Instructions for Form 720 for a special rule on deposits made in September. H&r block 1040ez Amount of Deposits Deposits for a semimonthly period generally must be at least 95% of the net tax liability for that period unless the safe harbor rule (discussed later) applies. H&r block 1040ez Generally, you do not have to make a deposit for a period in which you incurred no tax liability. H&r block 1040ez Net tax liability. H&r block 1040ez   Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. H&r block 1040ez You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. H&r block 1040ez If you use this method, you must use it for all semimonthly periods in the calendar quarter. H&r block 1040ez Do not reduce your liability by any amounts from Form 720X. H&r block 1040ez Safe Harbor Rule The safe harbor rule applies separately to deposits under the regular method and the alternative method. H&r block 1040ez Persons who filed Form 720 for the look-back quarter (the 2nd calendar quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly period in the current quarter is at least 1/6 (16. H&r block 1040ez 67%) of the net tax liability reported for the look-back quarter. H&r block 1040ez For the semimonthly period for which the additional deposit is required, the additional deposit must be at least 11/90 12. H&r block 1040ez 23%), 10/90 (11. H&r block 1040ez 12%) for non-EFTPS, of the net tax liability reported for the look-back quarter. H&r block 1040ez Also, the total deposit for that semimonthly period must be at least 1/6 (16. H&r block 1040ez 67%) of the net tax liability reported for the look-back quarter. H&r block 1040ez Exceptions. H&r block 1040ez   The safe harbor rule does not apply to: The 1st and 2nd quarters beginning on or after the effective date of an increase in the rate of tax unless the deposit of taxes for each semimonthly period in the calendar quarter is at least 1/6 (16. H&r block 1040ez 67%) of the tax liability you would have had for the look-back quarter if the increased rate of tax had been in effect for that look-back quarter, Any quarter if liability includes any tax not in effect throughout the look-back quarter, or For deposits under the alternative method, any quarter if liability includes any tax not in effect throughout the look-back quarter and the month preceding the look-back quarter. H&r block 1040ez Requirements to be met. H&r block 1040ez   For the safe harbor rule to apply, you must: Make each deposit timely at an authorized financial institution, and Pay any underpayment for the current quarter by the due date of the return. H&r block 1040ez    The IRS may withdraw the right to make deposits of tax using the safe harbor rule from any person not complying with these rules. H&r block 1040ez Tax rate increases. H&r block 1040ez   You must modify the safe harbor rule if there has been an increase in the rate of tax. H&r block 1040ez You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. H&r block 1040ez To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability. H&r block 1040ez Prev  Up  Next   Home   More Online Publications

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The H&r Block 1040ez

H&r block 1040ez 10. H&r block 1040ez   Business Bad Debts Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Definition of Business Bad DebtAccrual method. H&r block 1040ez Cash method. H&r block 1040ez Debt acquired from a decedent. H&r block 1040ez Liquidation. H&r block 1040ez Types of Business Bad Debts When a Debt Becomes Worthless How To Claim a Business Bad DebtSpecific Charge-Off Method Nonaccrual-Experience Method Recovery of a Bad DebtNet operating loss (NOL) carryover. H&r block 1040ez Introduction You have a bad debt if you cannot collect money owed to you. H&r block 1040ez A bad debt is either a business bad debt or a nonbusiness bad debt. H&r block 1040ez This chapter discusses only business bad debts. H&r block 1040ez Generally, a business bad debt is one that comes from operating your trade or business. H&r block 1040ez You can deduct business bad debts on Schedule C (Form 1040) or your applicable business income tax return. H&r block 1040ez All other bad debts are nonbusiness bad debts and are deductible only as short-term capital losses. H&r block 1040ez For more information on nonbusiness bad debts, see Publication 550. H&r block 1040ez Topics - This chapter discusses: Definition of business bad debt When a debt becomes worthless How to claim a business bad debt Recovery of a bad debt Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 556 Examination of Returns, Appeal Rights, and Claims for Refund Form (and Instructions) Schedule C (Form 1040) Profit or Loss From Business 1040X Amended U. H&r block 1040ez S. H&r block 1040ez Individual Income Tax Return 1045 Application for Tentative Refund 1139 Corporation Application for Tentative Refund 3115 Application for Change in Accounting Method See chapter 12 for information about getting publications and forms. H&r block 1040ez Definition of Business Bad Debt A business bad debt is a loss from the worthlessness of a debt that was either: Created or acquired in your trade or business, or Closely related to your trade or business when it became partly or totally worthless. H&r block 1040ez A debt is closely related to your trade or business if your primary motive for incurring the debt is business related. H&r block 1040ez Bad debts of a corporation (other than an S corporation) are always business bad debts. H&r block 1040ez Credit sales. H&r block 1040ez   Business bad debts are mainly the result of credit sales to customers. H&r block 1040ez Goods that have been sold, but not yet paid for, and services that have been performed, but not yet paid for, are recorded in your books as either accounts receivable or notes receivable. H&r block 1040ez After a reasonable period of time, if you have tried to collect the amount due, but are unable to do so, the uncollectible part becomes a business bad debt. H&r block 1040ez   Accounts or notes receivable valued at fair market value (FMV) when received are deductible only at that value, even though the FMV may be less than the face value. H&r block 1040ez If you purchased an account receivable for less than its face value, and the receivable subsequently becomes worthless, the most you are allowed to deduct is the amount you paid to acquire it. H&r block 1040ez    You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income. H&r block 1040ez This applies to amounts owed to you from all sources of taxable income, including sales, services, rents, and interest. H&r block 1040ez Accrual method. H&r block 1040ez   If you use the accrual method of accounting, you generally report income as you earn it. H&r block 1040ez You can only claim a bad debt deduction for an uncollectible receivable if you have previously included the uncollectible amount in income. H&r block 1040ez   If you qualify, you can use the nonaccrual-experience method of accounting discussed later. H&r block 1040ez Under this method, you do not have to accrue income that, based on your experience, you do not expect to collect. H&r block 1040ez Cash method. H&r block 1040ez   If you use the cash method of accounting, you generally report income when you receive payment. H&r block 1040ez You cannot claim a bad debt deduction for amounts owed to you because you never included those amounts in income. H&r block 1040ez For example, a cash basis architect cannot claim a bad debt deduction if a client fails to pay the bill because the architect's fee was never included in income. H&r block 1040ez Debts from a former business. H&r block 1040ez   If you sell your business but retain its receivables, these debts are business debts because they arose out of your trade or business. H&r block 1040ez If any of these receivables subsequently become worthless, the loss is still a business bad debt. H&r block 1040ez Debt acquired from a decedent. H&r block 1040ez   The character of a loss from debts of a business acquired from a decedent is determined in the same way as debts acquired on the purchase of a business. H&r block 1040ez The executor of the decedent's estate treats any loss from the debts as a business bad debt if the debts were closely related to the decedent's trade or business when they became worthless. H&r block 1040ez Otherwise, a loss from these debts becomes a nonbusiness bad debt for the decedent's estate. H&r block 1040ez Liquidation. H&r block 1040ez   If you liquidate your business and some of the accounts receivable that you retain become worthless, they become business bad debts. H&r block 1040ez Types of Business Bad Debts Business bad debts may result from the following. H&r block 1040ez Loans to clients and suppliers. H&r block 1040ez   If you loan money to a client, supplier, employee, or distributor for a business reason and you are unable to collect the loan after attempting to do so, you have a business bad debt. H&r block 1040ez Debts owed by political parties. H&r block 1040ez   If a political party (or other organization that accepts contributions or spends money to influence elections) owes you money and the debt becomes worthless, you can claim a bad debt deduction only if all of the following requirements are met. H&r block 1040ez You use the accrual method of accounting. H&r block 1040ez The debt arose from the sale of goods or services in the ordinary course of your trade or business. H&r block 1040ez More than 30% of your receivables accrued in the year of the sale were from sales to political parties. H&r block 1040ez You made substantial and continuing efforts to collect on the debt. H&r block 1040ez Loan or capital contribution. H&r block 1040ez   You cannot claim a bad debt deduction for a loan you made to a corporation if, based on the facts and circumstances, the loan is actually a contribution to capital. H&r block 1040ez Debts of an insolvent partner. H&r block 1040ez   If your business partnership breaks up and one of your former partners becomes insolvent, you may have to pay more than your pro rata share of the partnership's debts. H&r block 1040ez If you pay any part of the insolvent partner's share of the debts, you can claim a bad debt deduction for the amount you paid that is attributable to the insolvent partner's share. H&r block 1040ez Business loan guarantee. H&r block 1040ez   If you guarantee a debt that subsequently becomes worthless, the debt can qualify as a business bad debt if all the following requirements are met. H&r block 1040ez You made the guarantee in the course of your trade or business. H&r block 1040ez You have a legal duty to pay the debt. H&r block 1040ez You made the guarantee before the debt became worthless. H&r block 1040ez You meet this requirement if you reasonably expected you would not have to pay the debt without full reimbursement from the borrower. H&r block 1040ez You received reasonable consideration for making the guarantee. H&r block 1040ez You meet this requirement if you made the guarantee in accord with normal business practice or for a good faith business purpose. H&r block 1040ez Example. H&r block 1040ez Jane Zayne owns the Zayne Dress Company. H&r block 1040ez She guaranteed payment of a $20,000 note for Elegant Fashions, a dress outlet. H&r block 1040ez Elegant Fashions is one of Zayne's largest clients. H&r block 1040ez Elegant Fashions later defaulted on the loan. H&r block 1040ez As a result, Ms. H&r block 1040ez Zayne paid the remaining balance of the loan in full to the bank. H&r block 1040ez She can claim a business bad debt deduction only for the amount she paid, since her guarantee was made in the course of her trade or business for a good faith business purpose. H&r block 1040ez She was motivated by the desire to retain one of her better clients and keep a sales outlet. H&r block 1040ez Deductible in the year paid. H&r block 1040ez   If you make a payment on a loan you guaranteed, you can deduct it in the year paid, unless you have rights against the borrower. H&r block 1040ez Rights against a borrower. H&r block 1040ez   When you make payment on a loan you guaranteed, you may have the right to take the place of the lender. H&r block 1040ez The debt is then owed to you. H&r block 1040ez If you have this right, or some other right to demand payment from the borrower, you cannot claim a bad debt deduction until these rights become partly or totally worthless. H&r block 1040ez Joint debtor. H&r block 1040ez   If two or more debtors jointly owe you money, your inability to collect from one does not enable you to deduct a proportionate amount as a bad debt. H&r block 1040ez Sale of mortgaged property. H&r block 1040ez   If mortgaged or pledged property is sold for less than the debt, the unpaid, uncollectible balance of the debt is a bad debt. H&r block 1040ez When a Debt Becomes Worthless A debt becomes worthless when there is no longer any chance the amount owed will be paid. H&r block 1040ez This may occur when the debt is due or prior to that date. H&r block 1040ez To demonstrate worthlessness, you must only show that you have taken reasonable steps to collect the debt but were unable to do so. H&r block 1040ez It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. H&r block 1040ez Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. H&r block 1040ez Property received for debt. H&r block 1040ez   If you receive property in partial settlement of a debt, reduce the debt by the property's FMV, which becomes the property's basis. H&r block 1040ez You can deduct the remaining debt as a bad debt if and when it becomes worthless. H&r block 1040ez   If you later sell the property for more than its basis, any gain on the sale is due to the appreciation of the property. H&r block 1040ez It is not a recovery of a bad debt. H&r block 1040ez For information on the sale of an asset, see Publication 544. H&r block 1040ez How To Claim a Business Bad Debt There are two methods to claim a business bad debt. H&r block 1040ez The specific charge-off method. H&r block 1040ez The nonaccrual-experience method. H&r block 1040ez Generally, you must use the specific charge-off method. H&r block 1040ez However, you may use the nonaccrual-experience method if you meet the requirements discussed later under Nonaccrual-Experience Method . H&r block 1040ez Specific Charge-Off Method If you use the specific charge-off method, you can deduct specific business bad debts that become either partly or totally worthless during the tax year. H&r block 1040ez However, with respect to partly worthless bad debts, your deduction is limited to the amount you charged off on your books during the year. H&r block 1040ez Partly worthless debts. H&r block 1040ez   You can deduct specific bad debts that become partly uncollectible during the tax year. H&r block 1040ez Your tax deduction is limited to the amount you charge off on your books during the year. H&r block 1040ez You do not have to charge off and deduct your partly worthless debts annually. H&r block 1040ez You can delay the charge off until a later year. H&r block 1040ez However, you cannot deduct any part of a debt after the year it becomes totally worthless. H&r block 1040ez Significantly modified debt. H&r block 1040ez   An exception to the charge-off rule exists for debt which has been significantly modified and on which the holder recognized gain. H&r block 1040ez For more information, see Regulations section 1. H&r block 1040ez 166-3(a)(3). H&r block 1040ez Deduction disallowed. H&r block 1040ez   Generally, you can claim a partial bad debt deduction only in the year you make the charge-off on your books. H&r block 1040ez If, under audit, the IRS does not allow your deduction and the debt becomes partly worthless in a later tax year, you can deduct the amount you charged off in that year plus the disallowed amount charged off in the earlier year. H&r block 1040ez The charge-off in the earlier year, unless reversed on your books, fulfills the charge-off requirement for the later year. H&r block 1040ez Totally worthless debts. H&r block 1040ez   If a debt becomes totally worthless in the current tax year, you can deduct the entire amount, less any amount deducted in an earlier tax year when the debt was only partly worthless. H&r block 1040ez   You do not have to make an actual charge-off on your books to claim a bad debt deduction for a totally worthless debt. H&r block 1040ez However, you may want to do so. H&r block 1040ez If you do not and the IRS later rules the debt is only partly worthless, you will not be allowed a deduction for the debt in that tax year because a deduction of a partly worthless bad debt is limited to the amount actually charged off. H&r block 1040ez See Partly worthless debts, earlier. H&r block 1040ez Filing a claim for refund. H&r block 1040ez   If you did not deduct a bad debt on your original return for the year it became worthless, you can file a claim for a credit or refund. H&r block 1040ez If the bad debt was totally worthless, you must file the claim by the later of the following dates. H&r block 1040ez 7 years from the date your original return was due (not including extensions). H&r block 1040ez 2 years from the date you paid the tax. H&r block 1040ez   If the claim is for a partly worthless bad debt, you must file the claim by the later of the following dates. H&r block 1040ez 3 years from the date you filed your original return. H&r block 1040ez 2 years from the date you paid the tax. H&r block 1040ez You may have longer to file the claim if you were unable to manage your financial affairs due to a physical or mental impairment. H&r block 1040ez Such an impairment requires proof of existence. H&r block 1040ez   For details and more information about filing a claim, see Publication 556. H&r block 1040ez Use one of the following forms to file a claim. H&r block 1040ez For more information, see the instructions for the applicable form. H&r block 1040ez Table 10-1. H&r block 1040ez Forms Used To File a Claim IF you filed as a. H&r block 1040ez . H&r block 1040ez . H&r block 1040ez THEN file. H&r block 1040ez . H&r block 1040ez . H&r block 1040ez Sole proprietor or farmer Form 1040X Corporation Form 1120X S corporation Form 1120S and check box H(4) Partnership Form 1065X if filing on paper or  Form 1065 and check box G(5) if filing electronically Nonaccrual-Experience Method If you use an accrual method of accounting and qualify under the rules explained in this section, you can use the nonaccrual-experience method for bad debts. H&r block 1040ez Under this method, you do not accrue service related income you expect to be uncollectible. H&r block 1040ez Because the expected uncollectible amounts are not included in income, these amounts are not later deducted from income. H&r block 1040ez Generally, you can use the nonaccrual-experience method for accounts receivable for services you performed only if: The services are provided in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, or the performing arts, or You meet the $5 million gross receipts test for all prior years. H&r block 1040ez Service related income. H&r block 1040ez   You can use the nonaccrual-experience method only for amounts earned by performing services. H&r block 1040ez You cannot use this method for amounts owed to you from activities such as lending money, selling goods, or acquiring receivables or other rights to receive payment. H&r block 1040ez Gross receipts test. H&r block 1040ez   To find out if you meet the $5 million gross receipts test for all prior years, you must figure the average annual gross receipts for each prior year. H&r block 1040ez If your average annual gross receipts for any year exceeds $5 million, you cannot use the non-accural experience method. H&r block 1040ez   The average annual gross receipts for any year is the average of gross receipts from the year in question and the 2 previous years. H&r block 1040ez For example, if you were figuring the average annual gross receipts for 2013, you would average your gross receipts for 2011, 2012, and 2013. H&r block 1040ez Interest or penalty charged. H&r block 1040ez   Generally, you cannot use the nonaccrual-experience method for amounts due on which you charge interest or a late payment penalty. H&r block 1040ez However, do not treat a discount offered for early payment as the charging of interest or a penalty if both the following apply. H&r block 1040ez You otherwise accrue the full amount due as gross income at the time you provide the services. H&r block 1040ez You treat the discount allowed for early payment as an adjustment to gross income in the year of payment. H&r block 1040ez Change in accounting method. H&r block 1040ez   Generally, you must obtain consent to change to a nonaccrual-experience method (other than one of the safe harbor methods) or to change from one method to another. H&r block 1040ez See Form 3115 and the Instructions for Form 3115 for more information. H&r block 1040ez Recovery of a Bad Debt If you claim a deduction for a bad debt on your income tax return and later recover (collect) all or part of it, you may have to include all or part of the recovery in gross income. H&r block 1040ez The amount you include is limited to the amount you actually deducted. H&r block 1040ez However, you can exclude the amount deducted that did not reduce your tax. H&r block 1040ez Report the recovery as “Other income” on the appropriate business form or schedule. H&r block 1040ez See Recoveries in Publication 525 for more information. H&r block 1040ez Net operating loss (NOL) carryover. H&r block 1040ez   If a bad debt deduction increases an NOL carryover that has not expired before the beginning of the tax year in which the recovery takes place, you treat the deduction as having reduced your tax. H&r block 1040ez A bad debt deduction that contributes to a NOL helps lower taxes in the year to which you carry the NOL. H&r block 1040ez For more information about NOLs, see Publication 536. H&r block 1040ez Also, see the Instructions for Form 1045, and the Instructions for Form 1139. H&r block 1040ez Prev  Up  Next   Home   More Online Publications