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How To Do A Tax Amendment

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How To Do A Tax Amendment

How to do a tax amendment Index A Archer MSAs, Archer MSAs, Employment taxes. How to do a tax amendment Assistance (see Tax help) C Contributions to FSA, Contributions to an FSA HRA, Contributions to an HRA HSA, Contributions to an HSA MSA, Contributions to an MSA D Death of HSA holder, Death of HSA Holder MSA holder, Death of the Archer MSA Holder Distributions from FSA, Distributions From an FSA HRA, Distributions From an HRA HSA, Distributions From an HSA MSA, Distributions From an MSA E Employer participation FSA, Employer Participation HRA, Employer Participation HSA, Employer Participation MSA, Employer Participation F Flexible Spending Arrangements Grace Period, Health FSA – grace period. How to do a tax amendment Flexible spending arrangements, Flexible Spending Arrangements (FSAs), Employer Participation Balance in, Balance in an FSA Contributions to, Contributions to an FSA Distributions from, Distributions From an FSA Qualifying for, Qualifying for an FSA When to contribute, When To Contribute Form 5329, Excess contributions. How to do a tax amendment , Excess contributions. How to do a tax amendment 5498–SA, Form 8889. How to do a tax amendment , Reporting Contributions on Your Return 8853, Additional tax. How to do a tax amendment , Filing Form 8853 8889, Form 8889. How to do a tax amendment , Additional tax. How to do a tax amendment , Filing Form 8889 Free tax services, Free help with your tax return. How to do a tax amendment H Health plans, high deductible, High deductible health plan (HDHP). How to do a tax amendment , High deductible health plan (HDHP). How to do a tax amendment Health reimbursement arrangements, Health Reimbursement Arrangements (HRAs), Employer Participation Balance in, Balance in an HRA Contributions to, Contributions to an HRA Distributions from, Distributions From an HRA Qualifying for, Qualifying for an HRA Health savings accounts, Health Savings Accounts (HSAs), Employment taxes. How to do a tax amendment Balance in, Balance in an HSA Contributions to, Contributions to an HSA Deemed distributions, Deemed distributions from HSAs. How to do a tax amendment Distributions from, Distributions From an HSA Last-month rule, Last-month rule. How to do a tax amendment Partnerships, Reporting Contributions on Your Return Qualifying for, Qualifying for an HSA Rollovers, Rollovers S corporations, Reporting Contributions on Your Return When to contribute, When To Contribute Help (see Tax help) High deductible health plan, High deductible health plan (HDHP). How to do a tax amendment , High deductible health plan (HDHP). How to do a tax amendment M Medical expenses, qualified, Qualified medical expenses. How to do a tax amendment , Qualified medical expenses. How to do a tax amendment , Qualified medical expenses. How to do a tax amendment , Qualified medical expenses. How to do a tax amendment Medical savings accounts, Medical Savings Accounts (MSAs), Medicare Advantage MSAs Balance in, Balance in an Archer MSA Contributions to, Contributions to an MSA Deemed distributions, Deemed distributions from Archer MSAs. How to do a tax amendment Distributions from, Distributions From an MSA Medicare Advantage MSAs, Medicare Advantage MSAs Qualifying for, Qualifying for an Archer MSA When to contribute, When To Contribute Medicare Advantage MSAs, Medicare Advantage MSAs P Preventive care, High deductible health plan (HDHP). How to do a tax amendment Publications (see Tax help) Q Qualified HSA funding distribution, Qualified HSA funding distribution. How to do a tax amendment T Tax help, How To Get Tax Help Testing period Last-month rule, Testing period. How to do a tax amendment Qualified HSA funding distribution, Funding distribution – testing period. How to do a tax amendment TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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SOI Tax Stats - Nonfarm Sole Proprietorship Statistics

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The Sole Proprietorship study covers basic data, including business receipts, deductions, and net income reported by an individual taxpayer on Schedule C of Form 1040. The information is for nonfarm sole proprietorships and is broken down by industrial groups for analysis of the data.

Information on farms, reported by individual taxpayers on Schedule F of Form 1040, is included in many of the Form 1040 data tables found in Individual Tax Statistics.


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Integrated Business Data: Tables and articles that combine the annual SOI cross-sectional studies of corporation (C and S corporations), partnership, and nonfarm sole proprietorship data.

Statistical Tables

All tables are available as Microsoft Excel files. A free Excel viewer is available for download, if needed.

Business Receipts, Selected Deductions, Payroll, and Net Income

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Industrial Sectors Classified with the North American Industry Classification System

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2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998

 

Classified by:

Industrial Groups Classified with the Standard Industrial Codes

Tax Years:

1998  1997  1996
Income Statements
Classified by: Industrial Sectors Classified with the North American Industry Classification System
Tax Years: 2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998
 
Classified by: Industrial Groups Classified with the Standard Industrial Codes
Tax Years: 1998  1997  1996


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Sole Proprietorship Returns
2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1996

U.S Sole Proprietorships: A Gender Comparison
2000–1985

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Page Last Reviewed or Updated: 14-Aug-2013

The How To Do A Tax Amendment

How to do a tax amendment 5. How to do a tax amendment   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 do a tax amendment Short-term lease. How to do a tax amendment Retail space. How to do a tax amendment Qualified long-term real property. How to do a tax amendment 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 do a tax amendment If there is a connection between any income you receive and your business, the income is business income. How to do a tax amendment 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 do a tax amendment You can have business income even if you are not involved in the activity on a regular full-time basis. How to do a tax amendment Income from work you do on the side in addition to your regular job can be business income. How to do a tax amendment You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. How to do a tax amendment 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 do a tax amendment For information on selling business assets, see chapter 3. How to do a tax amendment Nonemployee compensation. How to do a tax amendment Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. How to do a tax amendment This includes amounts reported as nonemployee compensation in box 7 of the form. How to do a tax amendment You can find more information in the instructions on the back of the Form 1099-MISC you received. How to do a tax amendment 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 do a tax amendment In most cases, your business income will be in the form of cash, checks, and credit card charges. How to do a tax amendment But business income can be in other forms, such as property or services. How to do a tax amendment These and other types of income are explained next. How to do a tax amendment If you are a U. How to do a tax amendment S. How to do a tax amendment 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 do a tax amendment S. How to do a tax amendment law. How to do a tax amendment If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. How to do a tax amendment For details, see Publication 54, Tax Guide for U. How to do a tax amendment S. How to do a tax amendment Citizens and Resident Aliens Abroad. How to do a tax amendment Bartering for Property or Services Bartering is an exchange of property or services. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment Example 1. How to do a tax amendment You are a self-employed lawyer. How to do a tax amendment You perform legal services for a client, a small corporation. How to do a tax amendment In payment for your services, you receive shares of stock in the corporation. How to do a tax amendment You must include the fair market value of the shares in income. How to do a tax amendment Example 2. How to do a tax amendment You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. How to do a tax amendment You must include the fair rental value of the apartment in your gross receipts. How to do a tax amendment Your landlord must include the fair market value of the work of art in his or her rental income. How to do a tax amendment Example 3. How to do a tax amendment You are a self-employed accountant. How to do a tax amendment 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 do a tax amendment Members get in touch with other members directly and bargain for the value of the services to be performed. How to do a tax amendment In return for accounting services you provided for the house painter's business, the house painter painted your home. How to do a tax amendment You must include in gross receipts the fair market value of the services you received from the house painter. How to do a tax amendment The house painter must include the fair market value of your accounting services in his or her gross receipts. How to do a tax amendment Example 4. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment 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 do a tax amendment 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 do a tax amendment It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. How to do a tax amendment See Publication 15 (Circular E), Employer's Tax Guide. How to do a tax amendment Example 5. How to do a tax amendment You operate a plumbing business and use the cash method of accounting. How to do a tax amendment You join a barter club and agree to provide plumbing services to any member for a specified number of hours. How to do a tax amendment Each member has access to a directory that lists the members of the club and the services available. How to do a tax amendment Members contact each other directly and request services to be performed. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment Information returns. How to do a tax amendment   If you are involved in a bartering transaction, you may have to file either of the following forms. How to do a tax amendment Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. How to do a tax amendment Form 1099-MISC, Miscellaneous Income. How to do a tax amendment For information about these forms, see the General Instructions for Certain Information Returns. How to do a tax amendment 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 do a tax amendment , who provides services (maid services, etc. How to do a tax amendment ) for guests, report the rental income and expenses on Schedule C or C-EZ. How to do a tax amendment 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 do a tax amendment For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). How to do a tax amendment Real estate dealer. How to do a tax amendment   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 do a tax amendment Rent you receive from real estate held for sale to customers is subject to SE tax. How to do a tax amendment However, rent you receive from real estate held for speculation or investment is not subject to SE tax. How to do a tax amendment Trailer park owner. How to do a tax amendment   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 do a tax amendment    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 do a tax amendment Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. How to do a tax amendment   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 do a tax amendment   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 do a tax amendment Hotels, boarding houses, and apartments. How to do a tax amendment   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 do a tax amendment   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 do a tax amendment An example of a service that is not normally provided for the convenience of the occupants is maid service. How to do a tax amendment However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. How to do a tax amendment Prepaid rent. How to do a tax amendment   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 do a tax amendment This is true no matter what accounting method or period you use. How to do a tax amendment Lease bonus. How to do a tax amendment   A bonus you receive from a lessee for granting a lease is an addition to the rent. How to do a tax amendment Include it in your gross receipts in the year received. How to do a tax amendment Lease cancellation payments. How to do a tax amendment   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. How to do a tax amendment Payments to third parties. How to do a tax amendment   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 do a tax amendment A common example of this kind of income is a lessee's payment of your property taxes on leased real property. How to do a tax amendment Settlement payments. How to do a tax amendment   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 do a tax amendment Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. How to do a tax amendment ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. How to do a tax amendment Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. How to do a tax amendment If you receive any of those payments, include them in your gross receipts as explained in that discussion. How to do a tax amendment Interest and Dividend Income Interest and dividends may be considered business income. How to do a tax amendment Interest. How to do a tax amendment   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. How to do a tax amendment Interest received on loans is business income if you are in the business of lending money. How to do a tax amendment Uncollectible loans. How to do a tax amendment   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 do a tax amendment If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. How to do a tax amendment See Bad Debts in chapter 8. How to do a tax amendment Unstated interest. How to do a tax amendment   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 do a tax amendment See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. How to do a tax amendment Dividends. How to do a tax amendment   Generally, dividends are business income to dealers in securities. How to do a tax amendment For most sole proprietors and statutory employees, however, dividends are nonbusiness income. How to do a tax amendment If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. How to do a tax amendment   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 do a tax amendment To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. How to do a tax amendment Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. How to do a tax amendment 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 do a tax amendment Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. How to do a tax amendment If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. How to do a tax amendment Exceptions The following discussion covers some exceptions to the general rule for canceled debt. How to do a tax amendment Price reduced after purchase. How to do a tax amendment   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 do a tax amendment 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 do a tax amendment Deductible debt. How to do a tax amendment   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 do a tax amendment Example. How to do a tax amendment You get accounting services for your business on credit. How to do a tax amendment Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. How to do a tax amendment Your accountant forgives part of the amount you owe for the accounting services. How to do a tax amendment How you treat the canceled debt depends on your method of accounting. How to do a tax amendment 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 do a tax amendment Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. How to do a tax amendment   For information on the cash and accrual methods of accounting, see chapter 2. How to do a tax amendment Exclusions Do not include canceled debt in income in the following situations. How to do a tax amendment However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. How to do a tax amendment For more information, see Form 982. How to do a tax amendment The cancellation takes place in a bankruptcy case under title 11 of the U. How to do a tax amendment S. How to do a tax amendment Code (relating to bankruptcy). How to do a tax amendment See Publication 908, Bankruptcy Tax Guide. How to do a tax amendment The cancellation takes place when you are insolvent. How to do a tax amendment You can exclude the canceled debt to the extent you are insolvent. How to do a tax amendment See Publication 908. How to do a tax amendment The canceled debt is a qualified farm debt owed to a qualified person. How to do a tax amendment See chapter 3 in Publication 225, Farmer's Tax Guide. How to do a tax amendment The canceled debt is a qualified real property business debt. How to do a tax amendment This situation is explained later. How to do a tax amendment The canceled debt is qualified principal residence indebtedness which is discharged after 2006. How to do a tax amendment See Form 982. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment Debt. How to do a tax amendment   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. How to do a tax amendment Qualified real property business debt. How to do a tax amendment   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. How to do a tax amendment If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. How to do a tax amendment Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. How to do a tax amendment However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. How to do a tax amendment Cancellation of qualified real property business debt. How to do a tax amendment   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. How to do a tax amendment It was incurred or assumed in connection with real property used in a trade or business. How to do a tax amendment It was secured by such real property. How to do a tax amendment It was incurred or assumed at either of the following times. How to do a tax amendment Before January 1, 1993. How to do a tax amendment After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. How to do a tax amendment It is debt to which you choose to apply these rules. How to do a tax amendment   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 do a tax amendment   You cannot exclude more than either of the following amounts. How to do a tax amendment 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 do a tax amendment The total adjusted bases of depreciable real property held by you immediately before the cancellation. How to do a tax amendment These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. How to do a tax amendment Do not take into account depreciable real property acquired in contemplation of the cancellation. How to do a tax amendment Election. How to do a tax amendment   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 do a tax amendment You must file your return by the due date (including extensions). How to do a tax amendment 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 do a tax amendment For more information, see When To File in the form instructions. How to do a tax amendment Other Income The following discussion explains how to treat other types of business income you may receive. How to do a tax amendment Restricted property. How to do a tax amendment   Restricted property is property that has certain restrictions that affect its value. How to do a tax amendment 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 do a tax amendment However, you can choose to be taxed in the year you receive the property. How to do a tax amendment For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. How to do a tax amendment Gains and losses. How to do a tax amendment   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 do a tax amendment Instead, you must report these gains and losses on other forms. How to do a tax amendment For more information, see chapter 3. How to do a tax amendment Promissory notes. How to do a tax amendment   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 do a tax amendment In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. How to do a tax amendment Lost income payments. How to do a tax amendment   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 do a tax amendment Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. How to do a tax amendment Damages. How to do a tax amendment   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 do a tax amendment Patent infringement. How to do a tax amendment Breach of contract or fiduciary duty. How to do a tax amendment Antitrust injury. How to do a tax amendment Economic injury. How to do a tax amendment   You may be entitled to a deduction against the income if it compensates you for actual economic injury. How to do a tax amendment Your deduction is the smaller of the following amounts. How to do a tax amendment 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 do a tax amendment Your loss from the injury that you have not yet deducted. How to do a tax amendment Punitive damages. How to do a tax amendment   You must also include punitive damages in income. How to do a tax amendment Kickbacks. How to do a tax amendment   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. How to do a tax amendment 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 do a tax amendment Recovery of items previously deducted. How to do a tax amendment   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 do a tax amendment 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 do a tax amendment 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 do a tax amendment Example. How to do a tax amendment 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 do a tax amendment He also had 2 personal exemptions for a total of $7,800. How to do a tax amendment He would not pay income tax even if he did not deduct the bad debt. How to do a tax amendment Therefore, he will not report as income any part of the $300 he may recover in any future year. How to do a tax amendment Exception for depreciation. How to do a tax amendment   This rule does not apply to depreciation. How to do a tax amendment You recover depreciation using the rules explained next. How to do a tax amendment Recapture of depreciation. How to do a tax amendment   In the following situations, you have to recapture the depreciation deduction. How to do a tax amendment This means you include in income part or all of the depreciation you deducted in previous years. How to do a tax amendment Listed property. How to do a tax amendment   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 do a tax amendment You do this by including in income on Schedule C part of the depreciation you deducted in previous years. How to do a tax amendment Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. How to do a tax amendment For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. How to do a tax amendment That chapter explains how to determine whether property is used more than 50% in your business. How to do a tax amendment Section 179 property. How to do a tax amendment   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 do a tax amendment You do this by including in income on Schedule C part of the deduction you took. How to do a tax amendment Use Part IV of Form 4797 to figure the amount to include on Schedule C. How to do a tax amendment See chapter 2 in Publication 946 to find out when you recapture the deduction. How to do a tax amendment Sale or exchange of depreciable property. How to do a tax amendment   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 do a tax amendment You figure the income due to depreciation recapture in Part III of Form 4797. How to do a tax amendment For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. How to do a tax amendment Items That Are Not Income In some cases the property or money you receive is not income. How to do a tax amendment Appreciation. How to do a tax amendment   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. How to do a tax amendment Consignments. How to do a tax amendment   Consignments of merchandise to others to sell for you are not sales. How to do a tax amendment The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. How to do a tax amendment Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. How to do a tax amendment Merchandise you have shipped out on consignment is included in your inventory until it is sold. How to do a tax amendment   Do not include merchandise you receive on consignment in your inventory. How to do a tax amendment 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 do a tax amendment Construction allowances. How to do a tax amendment   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 do a tax amendment Under a short-term lease of retail space. How to do a tax amendment For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. How to do a tax amendment Amount you can exclude. How to do a tax amendment   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. How to do a tax amendment Short-term lease. How to do a tax amendment   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. How to do a tax amendment The following rules apply in determining whether the lease is for 15 years or less. How to do a tax amendment Take into account options to renew when figuring whether the lease is for 15 years or less. How to do a tax amendment But do not take into account any option to renew at fair market value determined at the time of renewal. How to do a tax amendment 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 do a tax amendment Retail space. How to do a tax amendment   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 do a tax amendment Qualified long-term real property. How to do a tax amendment   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 do a tax amendment Exchange of like-kind property. How to do a tax amendment   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 do a tax amendment This means that the gain is not taxable and the loss is not deductible. How to do a tax amendment A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. How to do a tax amendment For more information, see Form 8824. How to do a tax amendment Leasehold improvements. How to do a tax amendment   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 do a tax amendment 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 do a tax amendment Loans. How to do a tax amendment   Money borrowed through a bona fide loan is not income. How to do a tax amendment Sales tax. How to do a tax amendment   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 do a tax amendment 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 do a tax amendment Direct seller. How to do a tax amendment   You must report all income you receive as a direct seller on Schedule C or C-EZ. How to do a tax amendment This includes any of the following. How to do a tax amendment Income from sales—payments you receive from customers for products they buy from you. How to do a tax amendment Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. How to do a tax amendment Prizes, awards, and gifts you receive from your selling business. How to do a tax amendment You must report this income regardless of whether it is reported to you on an information return. How to do a tax amendment   You are a direct seller if you meet all the following conditions. How to do a tax amendment You are engaged in one of the following trades or businesses. How to do a tax amendment 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 do a tax amendment Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). How to do a tax amendment 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 do a tax amendment 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 do a tax amendment Executor or administrator. How to do a tax amendment   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 do a tax amendment A nonprofessional fiduciary (personal representative) and both of the following apply. How to do a tax amendment The estate includes an active trade or business in which you actively participate. How to do a tax amendment Your fees are related to the operation of that trade or business. How to do a tax amendment 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 do a tax amendment    If the fees do not meet the above requirements, report them on line 21 of Form 1040. How to do a tax amendment Fishing crew member. How to do a tax amendment    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 do a tax amendment Insurance agent, former. How to do a tax amendment   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 do a tax amendment You received payments after your agreement to perform services for the company ended. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment 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 do a tax amendment 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 do a tax amendment Insurance agent, retired. How to do a tax amendment   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 do a tax amendment Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. How to do a tax amendment   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. How to do a tax amendment Newspaper carrier or distributor. How to do a tax amendment   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. How to do a tax amendment   This rule applies whether or not you hire others to help you make deliveries. How to do a tax amendment It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. How to do a tax amendment Newspaper or magazine vendor. How to do a tax amendment   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 do a tax amendment You sell newspapers or magazines to ultimate consumers. How to do a tax amendment You sell them at a fixed price. How to do a tax amendment Your earnings are based on the difference between the sales price and your cost of goods sold. How to do a tax amendment   This rule applies whether or not you are guaranteed a minimum amount of earnings. How to do a tax amendment It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. How to do a tax amendment Notary public. How to do a tax amendment   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. How to do a tax amendment These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). How to do a tax amendment Public official. How to do a tax amendment   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. How to do a tax amendment 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 do a tax amendment 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 do a tax amendment   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 do a tax amendment Real estate agent or direct seller. How to do a tax amendment   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 do a tax amendment 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 do a tax amendment You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. How to do a tax amendment Securities dealer. How to do a tax amendment   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 do a tax amendment For more information, see sections 1256 and 1402(i). How to do a tax amendment Securities trader. How to do a tax amendment   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. How to do a tax amendment 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 do a tax amendment However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. How to do a tax amendment For more information about securities traders, see Publication 550, Investment Income and Expenses. How to do a tax amendment Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. How to do a tax amendment This section discusses some of the more common differences that may affect business transactions. How to do a tax amendment Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). How to do a tax amendment 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 do a tax amendment Dealers in real estate are not allowed to use inventories. How to do a tax amendment For more information on inventories, see chapter 2. How to do a tax amendment Income paid to a third party. How to do a tax amendment   All income you earn is taxable to you. How to do a tax amendment You cannot avoid tax by having the income paid to a third party. How to do a tax amendment Example. How to do a tax amendment You rent out your property and the rental agreement directs the lessee to pay the rent to your son. How to do a tax amendment The amount paid to your son is gross income to you. How to do a tax amendment Cash discounts. How to do a tax amendment   These are amounts the seller permits you to deduct from the invoice price for prompt payment. How to do a tax amendment For income tax purposes, you can use either of the following two methods to account for cash discounts. How to do a tax amendment Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). How to do a tax amendment Credit the cash discount to a discount income account. How to do a tax amendment You must use the chosen method every year for all your purchase discounts. How to do a tax amendment   If you use the second method, the credit balance in the account at the end of your tax year is business income. How to do a tax amendment Under this method, you do not reduce the cost of goods sold by the cash discounts you received. How to do a tax amendment 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 do a tax amendment Trade discounts. How to do a tax amendment   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. How to do a tax amendment Do not enter these discounts on your books of account. How to do a tax amendment Instead, use only the net amount as the cost of the merchandise purchased. How to do a tax amendment For more information, see Trade discounts in chapter 6. How to do a tax amendment Payment placed in escrow. How to do a tax amendment   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 do a tax amendment 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 do a tax amendment Sales returns and allowances. How to do a tax amendment   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 do a tax amendment Advance payments. How to do a tax amendment   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. How to do a tax amendment Insurance proceeds. How to do a tax amendment   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 do a tax amendment You cannot deduct the reimbursed part of a casualty or theft loss. How to do a tax amendment   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. How to do a tax amendment Prev  Up  Next   Home   More Online Publications