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How To Amend A Tax Return 2012

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How To Amend A Tax Return 2012

How to amend a tax return 2012 Publication 523 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. How to amend a tax return 2012 Tax questions. How to amend a tax return 2012 Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 523, such as legislation enacted after it was published, go to www. How to amend a tax return 2012 irs. How to amend a tax return 2012 gov/pub523. How to amend a tax return 2012 Reminders Change of address. How to amend a tax return 2012  If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. How to amend a tax return 2012 Mail it to the Internal Revenue Service Center for your old address. How to amend a tax return 2012 (Addresses for the Service Centers are on the back of the form. How to amend a tax return 2012 ) Home sold with undeducted points. How to amend a tax return 2012  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. How to amend a tax return 2012 See Points in Publication 936, Home Mortgage Interest Deduction. How to amend a tax return 2012 Photographs of missing children. How to amend a tax return 2012  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. How to amend a tax return 2012 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. How to amend a tax return 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. How to amend a tax return 2012 Introduction This publication explains the tax rules that apply when you sell your main home. How to amend a tax return 2012 In most cases, your main home is the one in which you live most of the time. How to amend a tax return 2012 If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). How to amend a tax return 2012 See Excluding the Gain , later. How to amend a tax return 2012 Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. How to amend a tax return 2012 If you have gain that cannot be excluded, you generally must report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses. How to amend a tax return 2012 You may also have to complete Form 4797, Sales of Business Property. How to amend a tax return 2012 See Reporting the Sale , later. How to amend a tax return 2012 If you have a loss on the sale, you generally cannot deduct it on your return. How to amend a tax return 2012 However, you may need to report it. How to amend a tax return 2012 See Reporting the Sale , later. How to amend a tax return 2012 The main topics in this publication are: Figuring gain or loss, Basis, Excluding the gain, Ownership and use tests, and Reporting the sale. How to amend a tax return 2012 Other topics include: Business use or rental of home, Deducting taxes in the year of sale, and Recapturing a federal mortgage subsidy. How to amend a tax return 2012 Net Investment Income Tax (NIIT). How to amend a tax return 2012   If any part of the gain on the sale of a home is not excluded under the rules discussed in this publication, it may be subject to the NIIT. How to amend a tax return 2012 For more details, see Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions. How to amend a tax return 2012 Worksheets. How to amend a tax return 2012   Near the end of this publication you will find worksheets you can use to figure your gain (or loss) and your exclusion. How to amend a tax return 2012 Use Worksheet 1 to figure the adjusted basis of the home you sold. How to amend a tax return 2012 Use Worksheet 2 to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the sale. How to amend a tax return 2012 If you do not qualify for the maximum exclusion, use Worksheet 3 to figure your reduced maximum exclusion. How to amend a tax return 2012 Date of sale. How to amend a tax return 2012    If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of sale should be shown in box 1. How to amend a tax return 2012 If you did not receive this form, the date of sale is the earlier of (a) the date title transferred or (b) the date the economic burdens and benefits of ownership shifted to the buyer. How to amend a tax return 2012 In most cases, these dates are the same. How to amend a tax return 2012 What is not covered in this publication. How to amend a tax return 2012   This publication does not cover the sale of rental property, second homes, or vacation homes. How to amend a tax return 2012 For information on how to report any gain or loss from those sales, see Publication 544, Sales and Other Dispositions of Assets. How to amend a tax return 2012 Comments and suggestions. How to amend a tax return 2012   We welcome your comments about this publication and your suggestions for future editions. How to amend a tax return 2012   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. How to amend a tax return 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. How to amend a tax return 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. How to amend a tax return 2012   You can send your comments from www. How to amend a tax return 2012 irs. How to amend a tax return 2012 gov/formspubs/. How to amend a tax return 2012 Click on “More Information” and then on “Comment on Tax Forms and Publications”. How to amend a tax return 2012   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. How to amend a tax return 2012 Ordering forms and publications. How to amend a tax return 2012   Visit www. How to amend a tax return 2012 irs. How to amend a tax return 2012 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. How to amend a tax return 2012 Internal Revenue Service 1201 N. How to amend a tax return 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. How to amend a tax return 2012   If you have a tax question, check the information available on IRS. How to amend a tax return 2012 gov or call 1-800-829-1040. How to amend a tax return 2012 We cannot answer tax questions sent to either of the above addresses. How to amend a tax return 2012 Useful Items - You may want to see: Publication 527 Residential Rental Property 530 Tax Information for Homeowners 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 551 Basis of Assets 587 Business Use of Your Home 936 Home Mortgage Interest Deduction 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 1040 U. How to amend a tax return 2012 S. How to amend a tax return 2012 Individual Income Tax Return 1040NR U. How to amend a tax return 2012 S. How to amend a tax return 2012 Nonresident Alien Income Tax Return 1040X Amended U. How to amend a tax return 2012 S. How to amend a tax return 2012 Individual Income Tax Return 1099-S Proceeds From Real Estate Transactions 4797 Sales of Business Property 5405 Repayment of the First-Time Homebuyer Credit 8822 Change of Address 8828 Recapture of Federal Mortgage Subsidy 8939 Allocation of Increase in Basis for Property Acquired From a Decedent 8949 Sales and Other Dispositions of Capital Assets W-2 Wage and Tax Statement See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. How to amend a tax return 2012 Prev  Up  Next   Home   More Online Publications
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The How To Amend A Tax Return 2012

How to amend a tax return 2012 5. How to amend a tax return 2012   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. How to amend a tax return 2012 Short-term lease. How to amend a tax return 2012 Retail space. How to amend a tax return 2012 Qualified long-term real property. How to amend a tax return 2012 Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. How to amend a tax return 2012 If there is a connection between any income you receive and your business, the income is business income. How to amend a tax return 2012 A connection exists if it is clear that the payment of income would not have been made if you did not have the business. How to amend a tax return 2012 You can have business income even if you are not involved in the activity on a regular full-time basis. How to amend a tax return 2012 Income from work you do on the side in addition to your regular job can be business income. How to amend a tax return 2012 You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. How to amend a tax return 2012 But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. How to amend a tax return 2012 For information on selling business assets, see chapter 3. How to amend a tax return 2012 Nonemployee compensation. How to amend a tax return 2012 Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. How to amend a tax return 2012 This includes amounts reported as nonemployee compensation in box 7 of the form. How to amend a tax return 2012 You can find more information in the instructions on the back of the Form 1099-MISC you received. How to amend a tax return 2012 Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. How to amend a tax return 2012 In most cases, your business income will be in the form of cash, checks, and credit card charges. How to amend a tax return 2012 But business income can be in other forms, such as property or services. How to amend a tax return 2012 These and other types of income are explained next. How to amend a tax return 2012 If you are a U. How to amend a tax return 2012 S. How to amend a tax return 2012 citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. How to amend a tax return 2012 S. How to amend a tax return 2012 law. How to amend a tax return 2012 If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. How to amend a tax return 2012 For details, see Publication 54, Tax Guide for U. How to amend a tax return 2012 S. How to amend a tax return 2012 Citizens and Resident Aliens Abroad. How to amend a tax return 2012 Bartering for Property or Services Bartering is an exchange of property or services. How to amend a tax return 2012 You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. How to amend a tax return 2012 If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. How to amend a tax return 2012 Example 1. How to amend a tax return 2012 You are a self-employed lawyer. How to amend a tax return 2012 You perform legal services for a client, a small corporation. How to amend a tax return 2012 In payment for your services, you receive shares of stock in the corporation. How to amend a tax return 2012 You must include the fair market value of the shares in income. How to amend a tax return 2012 Example 2. How to amend a tax return 2012 You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. How to amend a tax return 2012 You must include the fair rental value of the apartment in your gross receipts. How to amend a tax return 2012 Your landlord must include the fair market value of the work of art in his or her rental income. How to amend a tax return 2012 Example 3. How to amend a tax return 2012 You are a self-employed accountant. How to amend a tax return 2012 Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. How to amend a tax return 2012 Members get in touch with other members directly and bargain for the value of the services to be performed. How to amend a tax return 2012 In return for accounting services you provided for the house painter's business, the house painter painted your home. How to amend a tax return 2012 You must include in gross receipts the fair market value of the services you received from the house painter. How to amend a tax return 2012 The house painter must include the fair market value of your accounting services in his or her gross receipts. How to amend a tax return 2012 Example 4. How to amend a tax return 2012 You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. How to amend a tax return 2012 As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. How to amend a tax return 2012 You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. How to amend a tax return 2012 The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. How to amend a tax return 2012 It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. How to amend a tax return 2012 See Publication 15 (Circular E), Employer's Tax Guide. How to amend a tax return 2012 Example 5. How to amend a tax return 2012 You operate a plumbing business and use the cash method of accounting. How to amend a tax return 2012 You join a barter club and agree to provide plumbing services to any member for a specified number of hours. How to amend a tax return 2012 Each member has access to a directory that lists the members of the club and the services available. How to amend a tax return 2012 Members contact each other directly and request services to be performed. How to amend a tax return 2012 You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. How to amend a tax return 2012 You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. How to amend a tax return 2012 Information returns. How to amend a tax return 2012   If you are involved in a bartering transaction, you may have to file either of the following forms. How to amend a tax return 2012 Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. How to amend a tax return 2012 Form 1099-MISC, Miscellaneous Income. How to amend a tax return 2012 For information about these forms, see the General Instructions for Certain Information Returns. How to amend a tax return 2012 Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. How to amend a tax return 2012 , who provides services (maid services, etc. How to amend a tax return 2012 ) for guests, report the rental income and expenses on Schedule C or C-EZ. How to amend a tax return 2012 If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. How to amend a tax return 2012 For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). How to amend a tax return 2012 Real estate dealer. How to amend a tax return 2012   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. How to amend a tax return 2012 Rent you receive from real estate held for sale to customers is subject to SE tax. How to amend a tax return 2012 However, rent you receive from real estate held for speculation or investment is not subject to SE tax. How to amend a tax return 2012 Trailer park owner. How to amend a tax return 2012   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. How to amend a tax return 2012    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. How to amend a tax return 2012 Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. How to amend a tax return 2012   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. How to amend a tax return 2012   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. How to amend a tax return 2012 Hotels, boarding houses, and apartments. How to amend a tax return 2012   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. How to amend a tax return 2012   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. How to amend a tax return 2012 An example of a service that is not normally provided for the convenience of the occupants is maid service. How to amend a tax return 2012 However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. How to amend a tax return 2012 Prepaid rent. How to amend a tax return 2012   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. How to amend a tax return 2012 This is true no matter what accounting method or period you use. How to amend a tax return 2012 Lease bonus. How to amend a tax return 2012   A bonus you receive from a lessee for granting a lease is an addition to the rent. How to amend a tax return 2012 Include it in your gross receipts in the year received. How to amend a tax return 2012 Lease cancellation payments. How to amend a tax return 2012   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. How to amend a tax return 2012 Payments to third parties. How to amend a tax return 2012   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. How to amend a tax return 2012 A common example of this kind of income is a lessee's payment of your property taxes on leased real property. How to amend a tax return 2012 Settlement payments. How to amend a tax return 2012   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. How to amend a tax return 2012 Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. How to amend a tax return 2012 ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. How to amend a tax return 2012 Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. How to amend a tax return 2012 If you receive any of those payments, include them in your gross receipts as explained in that discussion. How to amend a tax return 2012 Interest and Dividend Income Interest and dividends may be considered business income. How to amend a tax return 2012 Interest. How to amend a tax return 2012   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. How to amend a tax return 2012 Interest received on loans is business income if you are in the business of lending money. How to amend a tax return 2012 Uncollectible loans. How to amend a tax return 2012   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. How to amend a tax return 2012 If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. How to amend a tax return 2012 See Bad Debts in chapter 8. How to amend a tax return 2012 Unstated interest. How to amend a tax return 2012   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. How to amend a tax return 2012 See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. How to amend a tax return 2012 Dividends. How to amend a tax return 2012   Generally, dividends are business income to dealers in securities. How to amend a tax return 2012 For most sole proprietors and statutory employees, however, dividends are nonbusiness income. How to amend a tax return 2012 If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. How to amend a tax return 2012   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. How to amend a tax return 2012 To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. How to amend a tax return 2012 Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. How to amend a tax return 2012 General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. How to amend a tax return 2012 Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. How to amend a tax return 2012 If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. How to amend a tax return 2012 Exceptions The following discussion covers some exceptions to the general rule for canceled debt. How to amend a tax return 2012 Price reduced after purchase. How to amend a tax return 2012   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. How to amend a tax return 2012 Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. How to amend a tax return 2012 Deductible debt. How to amend a tax return 2012   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. How to amend a tax return 2012 Example. How to amend a tax return 2012 You get accounting services for your business on credit. How to amend a tax return 2012 Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. How to amend a tax return 2012 Your accountant forgives part of the amount you owe for the accounting services. How to amend a tax return 2012 How you treat the canceled debt depends on your method of accounting. How to amend a tax return 2012 Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. How to amend a tax return 2012 Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. How to amend a tax return 2012   For information on the cash and accrual methods of accounting, see chapter 2. How to amend a tax return 2012 Exclusions Do not include canceled debt in income in the following situations. How to amend a tax return 2012 However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. How to amend a tax return 2012 For more information, see Form 982. How to amend a tax return 2012 The cancellation takes place in a bankruptcy case under title 11 of the U. How to amend a tax return 2012 S. How to amend a tax return 2012 Code (relating to bankruptcy). How to amend a tax return 2012 See Publication 908, Bankruptcy Tax Guide. How to amend a tax return 2012 The cancellation takes place when you are insolvent. How to amend a tax return 2012 You can exclude the canceled debt to the extent you are insolvent. How to amend a tax return 2012 See Publication 908. How to amend a tax return 2012 The canceled debt is a qualified farm debt owed to a qualified person. How to amend a tax return 2012 See chapter 3 in Publication 225, Farmer's Tax Guide. How to amend a tax return 2012 The canceled debt is a qualified real property business debt. How to amend a tax return 2012 This situation is explained later. How to amend a tax return 2012 The canceled debt is qualified principal residence indebtedness which is discharged after 2006. How to amend a tax return 2012 See Form 982. How to amend a tax return 2012 If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. How to amend a tax return 2012 If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. How to amend a tax return 2012 Debt. How to amend a tax return 2012   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. How to amend a tax return 2012 Qualified real property business debt. How to amend a tax return 2012   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. How to amend a tax return 2012 If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. How to amend a tax return 2012 Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. How to amend a tax return 2012 However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. How to amend a tax return 2012 Cancellation of qualified real property business debt. How to amend a tax return 2012   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. How to amend a tax return 2012 It was incurred or assumed in connection with real property used in a trade or business. How to amend a tax return 2012 It was secured by such real property. How to amend a tax return 2012 It was incurred or assumed at either of the following times. How to amend a tax return 2012 Before January 1, 1993. How to amend a tax return 2012 After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. How to amend a tax return 2012 It is debt to which you choose to apply these rules. How to amend a tax return 2012   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. How to amend a tax return 2012   You cannot exclude more than either of the following amounts. How to amend a tax return 2012 The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. How to amend a tax return 2012 The total adjusted bases of depreciable real property held by you immediately before the cancellation. How to amend a tax return 2012 These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. How to amend a tax return 2012 Do not take into account depreciable real property acquired in contemplation of the cancellation. How to amend a tax return 2012 Election. How to amend a tax return 2012   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. How to amend a tax return 2012 You must file your return by the due date (including extensions). How to amend a tax return 2012 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to amend a tax return 2012 For more information, see When To File in the form instructions. How to amend a tax return 2012 Other Income The following discussion explains how to treat other types of business income you may receive. How to amend a tax return 2012 Restricted property. How to amend a tax return 2012   Restricted property is property that has certain restrictions that affect its value. How to amend a tax return 2012 If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. How to amend a tax return 2012 However, you can choose to be taxed in the year you receive the property. How to amend a tax return 2012 For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. How to amend a tax return 2012 Gains and losses. How to amend a tax return 2012   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. How to amend a tax return 2012 Instead, you must report these gains and losses on other forms. How to amend a tax return 2012 For more information, see chapter 3. How to amend a tax return 2012 Promissory notes. How to amend a tax return 2012   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. How to amend a tax return 2012 In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. How to amend a tax return 2012 Lost income payments. How to amend a tax return 2012   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. How to amend a tax return 2012 Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. How to amend a tax return 2012 Damages. How to amend a tax return 2012   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. How to amend a tax return 2012 Patent infringement. How to amend a tax return 2012 Breach of contract or fiduciary duty. How to amend a tax return 2012 Antitrust injury. How to amend a tax return 2012 Economic injury. How to amend a tax return 2012   You may be entitled to a deduction against the income if it compensates you for actual economic injury. How to amend a tax return 2012 Your deduction is the smaller of the following amounts. How to amend a tax return 2012 The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. How to amend a tax return 2012 Your loss from the injury that you have not yet deducted. How to amend a tax return 2012 Punitive damages. How to amend a tax return 2012   You must also include punitive damages in income. How to amend a tax return 2012 Kickbacks. How to amend a tax return 2012   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. How to amend a tax return 2012 However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. How to amend a tax return 2012 Recovery of items previously deducted. How to amend a tax return 2012   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. How to amend a tax return 2012 However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. How to amend a tax return 2012 If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. How to amend a tax return 2012 Example. How to amend a tax return 2012 Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. How to amend a tax return 2012 He also had 2 personal exemptions for a total of $7,800. How to amend a tax return 2012 He would not pay income tax even if he did not deduct the bad debt. How to amend a tax return 2012 Therefore, he will not report as income any part of the $300 he may recover in any future year. How to amend a tax return 2012 Exception for depreciation. How to amend a tax return 2012   This rule does not apply to depreciation. How to amend a tax return 2012 You recover depreciation using the rules explained next. How to amend a tax return 2012 Recapture of depreciation. How to amend a tax return 2012   In the following situations, you have to recapture the depreciation deduction. How to amend a tax return 2012 This means you include in income part or all of the depreciation you deducted in previous years. How to amend a tax return 2012 Listed property. How to amend a tax return 2012   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. How to amend a tax return 2012 You do this by including in income on Schedule C part of the depreciation you deducted in previous years. How to amend a tax return 2012 Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. How to amend a tax return 2012 For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. How to amend a tax return 2012 That chapter explains how to determine whether property is used more than 50% in your business. How to amend a tax return 2012 Section 179 property. How to amend a tax return 2012   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. How to amend a tax return 2012 You do this by including in income on Schedule C part of the deduction you took. How to amend a tax return 2012 Use Part IV of Form 4797 to figure the amount to include on Schedule C. How to amend a tax return 2012 See chapter 2 in Publication 946 to find out when you recapture the deduction. How to amend a tax return 2012 Sale or exchange of depreciable property. How to amend a tax return 2012   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. How to amend a tax return 2012 You figure the income due to depreciation recapture in Part III of Form 4797. How to amend a tax return 2012 For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. How to amend a tax return 2012 Items That Are Not Income In some cases the property or money you receive is not income. How to amend a tax return 2012 Appreciation. How to amend a tax return 2012   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. How to amend a tax return 2012 Consignments. How to amend a tax return 2012   Consignments of merchandise to others to sell for you are not sales. How to amend a tax return 2012 The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. How to amend a tax return 2012 Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. How to amend a tax return 2012 Merchandise you have shipped out on consignment is included in your inventory until it is sold. How to amend a tax return 2012   Do not include merchandise you receive on consignment in your inventory. How to amend a tax return 2012 Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. How to amend a tax return 2012 Construction allowances. How to amend a tax return 2012   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. How to amend a tax return 2012 Under a short-term lease of retail space. How to amend a tax return 2012 For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. How to amend a tax return 2012 Amount you can exclude. How to amend a tax return 2012   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. How to amend a tax return 2012 Short-term lease. How to amend a tax return 2012   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. How to amend a tax return 2012 The following rules apply in determining whether the lease is for 15 years or less. How to amend a tax return 2012 Take into account options to renew when figuring whether the lease is for 15 years or less. How to amend a tax return 2012 But do not take into account any option to renew at fair market value determined at the time of renewal. How to amend a tax return 2012 Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. How to amend a tax return 2012 Retail space. How to amend a tax return 2012   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. How to amend a tax return 2012 Qualified long-term real property. How to amend a tax return 2012   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. How to amend a tax return 2012 Exchange of like-kind property. How to amend a tax return 2012   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. How to amend a tax return 2012 This means that the gain is not taxable and the loss is not deductible. How to amend a tax return 2012 A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. How to amend a tax return 2012 For more information, see Form 8824. How to amend a tax return 2012 Leasehold improvements. How to amend a tax return 2012   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. How to amend a tax return 2012 However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. How to amend a tax return 2012 Loans. How to amend a tax return 2012   Money borrowed through a bona fide loan is not income. How to amend a tax return 2012 Sales tax. How to amend a tax return 2012   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. How to amend a tax return 2012 Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). How to amend a tax return 2012 Direct seller. How to amend a tax return 2012   You must report all income you receive as a direct seller on Schedule C or C-EZ. How to amend a tax return 2012 This includes any of the following. How to amend a tax return 2012 Income from sales—payments you receive from customers for products they buy from you. How to amend a tax return 2012 Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. How to amend a tax return 2012 Prizes, awards, and gifts you receive from your selling business. How to amend a tax return 2012 You must report this income regardless of whether it is reported to you on an information return. How to amend a tax return 2012   You are a direct seller if you meet all the following conditions. How to amend a tax return 2012 You are engaged in one of the following trades or businesses. How to amend a tax return 2012 Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. How to amend a tax return 2012 Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). How to amend a tax return 2012 Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. How to amend a tax return 2012 Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. How to amend a tax return 2012 Executor or administrator. How to amend a tax return 2012   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. How to amend a tax return 2012 A nonprofessional fiduciary (personal representative) and both of the following apply. How to amend a tax return 2012 The estate includes an active trade or business in which you actively participate. How to amend a tax return 2012 Your fees are related to the operation of that trade or business. How to amend a tax return 2012 A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. How to amend a tax return 2012    If the fees do not meet the above requirements, report them on line 21 of Form 1040. How to amend a tax return 2012 Fishing crew member. How to amend a tax return 2012    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . How to amend a tax return 2012 Insurance agent, former. How to amend a tax return 2012   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. How to amend a tax return 2012 You received payments after your agreement to perform services for the company ended. How to amend a tax return 2012 You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. How to amend a tax return 2012 You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. How to amend a tax return 2012 The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. How to amend a tax return 2012 The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). How to amend a tax return 2012 Insurance agent, retired. How to amend a tax return 2012   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. How to amend a tax return 2012 Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. How to amend a tax return 2012   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. How to amend a tax return 2012 Newspaper carrier or distributor. How to amend a tax return 2012   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. How to amend a tax return 2012 You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). How to amend a tax return 2012 Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. How to amend a tax return 2012 You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. How to amend a tax return 2012   This rule applies whether or not you hire others to help you make deliveries. How to amend a tax return 2012 It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. How to amend a tax return 2012 Newspaper or magazine vendor. How to amend a tax return 2012   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. How to amend a tax return 2012 You sell newspapers or magazines to ultimate consumers. How to amend a tax return 2012 You sell them at a fixed price. How to amend a tax return 2012 Your earnings are based on the difference between the sales price and your cost of goods sold. How to amend a tax return 2012   This rule applies whether or not you are guaranteed a minimum amount of earnings. How to amend a tax return 2012 It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. How to amend a tax return 2012 Notary public. How to amend a tax return 2012   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. How to amend a tax return 2012 These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). How to amend a tax return 2012 Public official. How to amend a tax return 2012   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. How to amend a tax return 2012 This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. How to amend a tax return 2012 Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. How to amend a tax return 2012   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. How to amend a tax return 2012 Real estate agent or direct seller. How to amend a tax return 2012   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. How to amend a tax return 2012 Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. How to amend a tax return 2012 You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. How to amend a tax return 2012 Securities dealer. How to amend a tax return 2012   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. How to amend a tax return 2012 For more information, see sections 1256 and 1402(i). How to amend a tax return 2012 Securities trader. How to amend a tax return 2012   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. How to amend a tax return 2012 As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. How to amend a tax return 2012 However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. How to amend a tax return 2012 For more information about securities traders, see Publication 550, Investment Income and Expenses. How to amend a tax return 2012 Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. How to amend a tax return 2012 This section discusses some of the more common differences that may affect business transactions. How to amend a tax return 2012 Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). How to amend a tax return 2012 If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. How to amend a tax return 2012 Dealers in real estate are not allowed to use inventories. How to amend a tax return 2012 For more information on inventories, see chapter 2. How to amend a tax return 2012 Income paid to a third party. How to amend a tax return 2012   All income you earn is taxable to you. How to amend a tax return 2012 You cannot avoid tax by having the income paid to a third party. How to amend a tax return 2012 Example. How to amend a tax return 2012 You rent out your property and the rental agreement directs the lessee to pay the rent to your son. How to amend a tax return 2012 The amount paid to your son is gross income to you. How to amend a tax return 2012 Cash discounts. How to amend a tax return 2012   These are amounts the seller permits you to deduct from the invoice price for prompt payment. How to amend a tax return 2012 For income tax purposes, you can use either of the following two methods to account for cash discounts. How to amend a tax return 2012 Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). How to amend a tax return 2012 Credit the cash discount to a discount income account. How to amend a tax return 2012 You must use the chosen method every year for all your purchase discounts. How to amend a tax return 2012   If you use the second method, the credit balance in the account at the end of your tax year is business income. How to amend a tax return 2012 Under this method, you do not reduce the cost of goods sold by the cash discounts you received. How to amend a tax return 2012 When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. How to amend a tax return 2012 Trade discounts. How to amend a tax return 2012   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. How to amend a tax return 2012 Do not enter these discounts on your books of account. How to amend a tax return 2012 Instead, use only the net amount as the cost of the merchandise purchased. How to amend a tax return 2012 For more information, see Trade discounts in chapter 6. How to amend a tax return 2012 Payment placed in escrow. How to amend a tax return 2012   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. How to amend a tax return 2012 However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. How to amend a tax return 2012 Sales returns and allowances. How to amend a tax return 2012   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. How to amend a tax return 2012 Advance payments. How to amend a tax return 2012   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. How to amend a tax return 2012 Insurance proceeds. How to amend a tax return 2012   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. How to amend a tax return 2012 You cannot deduct the reimbursed part of a casualty or theft loss. How to amend a tax return 2012   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. 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