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How To Fill Out The 1040ez

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How To Fill Out The 1040ez

How to fill out the 1040ez Publication 334 - Introductory Material Table of Contents IntroductionOrdering forms and publications. How to fill out the 1040ez Tax questions. How to fill out the 1040ez Future Developments What's New for 2013 What's New for 2014 Reminders Photographs of Missing Children Introduction The purpose of this publication is to provide general information about the federal tax laws that apply to small business owners who are sole proprietors and to statutory employees. How to fill out the 1040ez This publication has information on business income, expenses, and tax credits that may help you file your income tax return. How to fill out the 1040ez Are you self-employed?   You are self-employed if you carry on a trade or business as a sole proprietor or an independent contractor. How to fill out the 1040ez Sole proprietor. How to fill out the 1040ez   A sole proprietor is someone who owns an unincorporated business by himself or herself. How to fill out the 1040ez However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. How to fill out the 1040ez Trade or business. How to fill out the 1040ez    A trade or business is generally an activity carried on to make a profit. How to fill out the 1040ez The facts and circumstances of each case determine whether or not an activity is a trade or business. How to fill out the 1040ez You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. How to fill out the 1040ez You do need to make ongoing efforts to further the interests of your business. How to fill out the 1040ez   You do not have to carry on regular full-time business activities to be self-employed. How to fill out the 1040ez Having a part-time business in addition to your regular job or business may be self-employment. How to fill out the 1040ez Independent contractor. How to fill out the 1040ez    People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. How to fill out the 1040ez However, whether they are independent contractors or employees depends on the facts in each case. How to fill out the 1040ez The general rule is that an individual is an independent contractor if the payer has the right to control or to direct only the result of the work and not how it will be done. How to fill out the 1040ez The earnings of a person who is working as an independent contractor are subject to self-employment tax. How to fill out the 1040ez For more information on determining whether you are an employee or independent contractor, see Publication 15-A, Employer's Supplemental Tax Guide. How to fill out the 1040ez Statutory employee. How to fill out the 1040ez   A statutory employee has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. How to fill out the 1040ez Statutory employees use Schedule C or C-EZ to report their wages and expenses. How to fill out the 1040ez Limited liability company (LLC). How to fill out the 1040ez   A limited liability company (LLC) is an entity formed under state law by filing articles of organization. How to fill out the 1040ez Generally, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. How to fill out the 1040ez An owner who is an individual may use Schedule C or C-EZ. How to fill out the 1040ez Business owned and operated by spouses. How to fill out the 1040ez   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. How to fill out the 1040ez Do not use Schedule C or C-EZ. How to fill out the 1040ez Instead, file Form 1065, U. How to fill out the 1040ez S. How to fill out the 1040ez Return of Partnership Income. How to fill out the 1040ez For more information, see Publication 541, Partnerships. How to fill out the 1040ez    Exception—Community income. How to fill out the 1040ez If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. How to fill out the 1040ez S. How to fill out the 1040ez possession, you can treat the business either as a sole proprietorship or a partnership. How to fill out the 1040ez The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. How to fill out the 1040ez A change in your reporting position will be treated as a conversion of the entity. How to fill out the 1040ez    Exception—Qualified joint venture. How to fill out the 1040ez If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. How to fill out the 1040ez Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. How to fill out the 1040ez For an explanation of "material participation," see the Instructions for Schedule C, line G. How to fill out the 1040ez   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. How to fill out the 1040ez Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. How to fill out the 1040ez For more information, see Qualified Joint Ventures in the Instructions for Schedule SE. How to fill out the 1040ez This publication does not cover the topics listed in the following table. How to fill out the 1040ez    IF you need information about: THEN you should see: Corporations Publication 542 Farming Publication 225 Fishermen (Capital Construction Fund)  Publication 595 Partnerships Publication 541 Passive activities Publication 925 Recordkeeping Publication 583 Rental Publication 527 S corporations Instructions for Form 1120S What you need to know. How to fill out the 1040ez   Table A provides a list of questions you need to answer to help you meet your federal tax obligations. How to fill out the 1040ez After each question is the location in this publication where you will find the related discussion. How to fill out the 1040ez Table A. How to fill out the 1040ez What You Need To Know About Federal Taxes (Note. How to fill out the 1040ez The following is a list of questions you may need to answer so you can fill out your federal income tax return. How to fill out the 1040ez Chapters are given to help you find the related discussion in this publication. How to fill out the 1040ez ) What must I know   Where to find the answer   What kinds of federal taxes do I have to pay? How do I pay them?   See chapter 1. How to fill out the 1040ez What forms must I file?   See chapter 1. How to fill out the 1040ez What must I do if I have employees?   See Employment Taxes in chapter 1. How to fill out the 1040ez Do I have to start my tax year in January, or can I start it in any other month?   See Accounting Periods in chapter 2. How to fill out the 1040ez What method can I use to account for my income and expenses?   See Accounting Methods in chapter 2. How to fill out the 1040ez What kinds of business income do I have to report on my tax return?   See chapter 5. How to fill out the 1040ez What kinds of business expenses can I deduct on my tax return?   See Business Expenses in chapter 8. How to fill out the 1040ez What kinds of expenses are not deductible as business expenses?   See Expenses You Cannot Deduct in chapter 8. How to fill out the 1040ez What happens if I have a business loss? Can I deduct it?   See chapter 9. How to fill out the 1040ez What must I do if I disposed of business property during the year?   See chapter 3. How to fill out the 1040ez What are my rights as a taxpayer?   See chapter 11. How to fill out the 1040ez Where do I go if I need help with federal tax matters?   See chapter 12. How to fill out the 1040ez IRS mission. How to fill out the 1040ez   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. How to fill out the 1040ez Comments and suggestions. How to fill out the 1040ez   We welcome your comments about this publication and your suggestions for future editions. How to fill out the 1040ez   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. How to fill out the 1040ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. How to fill out the 1040ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. How to fill out the 1040ez   You can send your comments from www. How to fill out the 1040ez irs. How to fill out the 1040ez gov/formspubs/. How to fill out the 1040ez Click on “More Information” then on “Comment on Tax Forms and Publications. How to fill out the 1040ez ”   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 fill out the 1040ez Ordering forms and publications. How to fill out the 1040ez   Visit  www. How to fill out the 1040ez irs. How to fill out the 1040ez 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 fill out the 1040ez  Internal Revenue Service 1201 N. How to fill out the 1040ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. How to fill out the 1040ez   If you have a tax question, check the information available on IRS. How to fill out the 1040ez gov or call 1-800-829-1040. How to fill out the 1040ez We cannot answer tax questions sent to either of the above addresses. How to fill out the 1040ez Future Developments For the latest information about developments related to Publication 334, such as legislation enacted after it was published, go to www. How to fill out the 1040ez irs. How to fill out the 1040ez gov/pub334. How to fill out the 1040ez What's New for 2013 The following are some of the tax changes for 2013. How to fill out the 1040ez For information on other changes, go to IRS. How to fill out the 1040ez gov. How to fill out the 1040ez Tax rates. How to fill out the 1040ez . How to fill out the 1040ez  For tax years beginning in 2013, the social security part of the self-employment tax increases to 12. How to fill out the 1040ez 4%. How to fill out the 1040ez The Medicare part of the tax remains at 2. How to fill out the 1040ez 9%. How to fill out the 1040ez As a result, the self-employment tax is 15. How to fill out the 1040ez 3%. How to fill out the 1040ez Maximum net earnings. How to fill out the 1040ez  The maximum net self-employment earnings subject to the social security part of the self-employment tax increases to $113,700 for 2013. How to fill out the 1040ez There is no maximum limit on earnings subject to the Medicare part. How to fill out the 1040ez Standard mileage rate. How to fill out the 1040ez  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. How to fill out the 1040ez 5 cents per mile. How to fill out the 1040ez For more information, see Car and Truck Expenses in chapter 8. How to fill out the 1040ez Simplified method for business use of home deduction. How to fill out the 1040ez . How to fill out the 1040ez  The IRS now provides a simplified method to determine your expenses for business use of your home. How to fill out the 1040ez For more information, see Business Use of Your Home in chapter 8. How to fill out the 1040ez What's New for 2014 The following are some of the tax changes for 2014. How to fill out the 1040ez For information on other changes, go to IRS. How to fill out the 1040ez gov. How to fill out the 1040ez Standard mileage rate. How to fill out the 1040ez  For 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. How to fill out the 1040ez Self-employment tax. How to fill out the 1040ez  The maximum net self-employment earnings subject to the social security part of the self-employment tax is $117,000 for 2014. How to fill out the 1040ez Reminders Accounting methods. How to fill out the 1040ez  Certain small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required to account for inventories. How to fill out the 1040ez For more information, see Inventories in chapter 2. How to fill out the 1040ez Reportable transactions. How to fill out the 1040ez  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. How to fill out the 1040ez You may have to pay a penalty if you are required to file Form 8886 but do not do so. How to fill out the 1040ez You may also have to pay interest and penalties on any reportable transaction understatements. How to fill out the 1040ez Reportable transactions include: Transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, Transactions offered to you under conditions of confidentiality for which you paid an advisor a minimum fee, Transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits, Transactions that result in losses of at least $2 million in any single tax year ($50,000 if from certain foreign currency transactions) or $4 million in any combination of tax years, and Transactions the same or substantially similar to one of the types of transactions the IRS has identified as a transaction of interest. How to fill out the 1040ez For more information, see the Instructions for Form 8886. How to fill out the 1040ez Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. How to fill out the 1040ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. How to fill out the 1040ez 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 fill out the 1040ez Prev  Up  Next   Home   More Online Publications
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Taxpayer Identification Numbers (TIN)

A Taxpayer Identification Number (TIN) is an identification number used by the Internal Revenue Service (IRS) in the administration of tax laws. It is issued either by the Social Security Administration (SSA) or by the IRS. A Social Security number (SSN) is issued by the SSA whereas all other TINs are issued by the IRS.
 

Taxpayer Identification Numbers

  • Social Security Number "SSN"
  • Employer Identification Number "EIN"
  • Individual Taxpayer Identification Number "ITIN"
  • Taxpayer Identification Number for Pending U.S. Adoptions "ATIN"
  • Preparer Taxpayer Identification Number "PTIN"
Note: The temporary IRS Numbers previously assigned are no longer valid.

Do I Need One?

A TIN must be furnished on returns, statements, and other tax related documents. For example a number must be furnished:

  • When filing your tax returns.
  • When claiming treaty benefits.

A TIN must be on a withholding certificate if the beneficial owner is claiming any of the following:

  • Tax treaty benefits (other than for income from marketable securities)
  • Exemption for effectively connected income
  • Exemption for certain annuities

When Claiming Exemptions for Dependent or Spouse:

You generally must list on your individual income tax return the social security number (SSN) of any person for whom you claim an exemption. If your dependent or spouse does not have and is not eligible to get an SSN, you must list the ITIN instead of an SSN. You do not need an SSN or ITIN for a child who was born and died in the same tax year. Instead of an SSN or ITIN, attach a copy of the child's birth certificate and write Died on the appropriate exemption line of your tax return.

How Do I Get A TIN?

SSN

You will need to complete Form SS-5, Application for a Social Security Card (PDF). You also must submit evidence of your identity, age, and U.S. citizenship or lawful alien status. For more information please see the Social Security web site.

Form SS-5 is also available by calling 1-800-772-1213 or visiting your local Social Security office. These services are free.

EIN

An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity. It is also used by estates and trusts which have income which is required to be reported on Form 1041, U.S. Income Tax Return for Estates and Trusts (PDF). Refer to Employer ID Numbers for more information.

The following form is available only to employers located in Puerto Rico, Solicitud de Número de Identificación Patronal (EIN) SS-4PR (PDF).

ITIN

An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN). It is a 9-digit number, beginning with the number "9", formatted like an SSN (NNN-NN-NNNN).

To obtain an ITIN, you must complete IRS Form W-7, IRS Application for Individual Taxpayer Identification Number (PDF) . The Form W-7 requires documentation substantiating foreign/alien status and true identity for each individual. You may either mail the documentation, along with the Form W-7, to the address shown in the Form W-7 Instructions, present it at IRS walk-in offices, or process your application through an Acceptance Agent authorized by the IRS. Form W-7(SP), Solicitud de Número de Identificación Personal del Contribuyente del Servicio de Impuestos Internos (PDF) is available for use by Spanish speakers.

Acceptance Agents are entities (colleges, financial institutions, accounting firms, etc.) who are authorized by the IRS to assist applicants in obtaining ITINs. They review the applicant's documentation and forward the completed Form W-7 to IRS for processing.

NOTE: You cannot claim the earned income credit using an ITIN.

Foreign persons who are individuals should apply for a social security number (SSN, if permitted) on Form SS-5 with the Social Security Administration, or should apply for an Individual Taxpayer Identification Number (ITIN) on Form W-7. Effective immediately, each ITIN applicant must now:

  • Apply using the revised Form W-7, Application for IRS Individual Taxpayer Identification Number; and
  • Attach a federal income tax return to the Form W-7.

Applicants who meet one of the exceptions to the requirement to file a tax return (see the Instructions for Form W-7) must provide documentation to support the exception.

New W-7/ITIN rules were issued on December 17, 2003. For a summary of those rules, please see the new Form W-7 and its instructions.

For more detailed information on ITINs, refer to:

ATIN

An Adoption Taxpayer Identification Number (ATIN) is a temporary nine-digit number issued by the IRS to individuals who are in the process of legally adopting a U.S. citizen or resident child but who cannot get an SSN for that child in time to file their tax return.

Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions (PDF) is used to apply for an ATIN. (NOTE: Do not use Form W-7A if the child is not a U.S. citizen or resident.)

PTIN

Beginning January 1, 2011, if you are a paid tax preparer you must use a valid Preparer Tax Identification Number (PTIN) on returns you prepare. Use of the PTIN no longer is optional. If you do not have a PTIN, you must get one by using the new IRS sign-up system. Even if you have a PTIN but you received it prior to September 28, 2010, you must apply for a new or renewed PTIN by using the new system. If all your authentication information matches, you may be issued the same number. You must have a PTIN if you, for compensation, prepare all or substantially all of any federal tax return or claim for refund.

If you do not want to apply for a PTIN online, use Form W-12, IRS Paid Preparer Tax Identification Number Application (PDF). The paper application will take 4-6 weeks to process.

If you are a foreign preparer who is unable to get a U.S. Social Security Number, please see the instructions on New Requirements for Tax Return Preparers: Frequently Asked Questions.

Foreign Persons and IRS Employer Identification Numbers

Foreign entities that are not individuals (i.e., foreign corporations, etc.) and that are required to have a federal Employer Identification Number (EIN) in order to claim an exemption from withholding because of a tax treaty (claimed on Form W-8BEN), need to submit Form SS-4 Application for Employer Identification Number to the Internal Revenue Service in order to apply for such an EIN. Those foreign entities filing Form SS-4 for the purpose of obtaining an EIN in order to claim a tax treaty exemption and which otherwise have no requirements to file a U.S. income tax return, employment tax return, or excise tax return, should comply with the following special instructions when filling out Form SS-4. When completing line 7b of Form SS-4, the applicant should write "N/A" in the block asking for an SSN or ITIN, unless the applicant already has an SSN or ITIN. When answering question 10 on Form SS-4, the applicant should check the "other" block and write or type in immediately after it one of the following phrases as most appropriate:

"For W-8BEN Purposes Only"
"For Tax Treaty Purposes Only"
"Required under Reg. 1.1441-1(e)(4)(viii)"
"897(i) Election"

If questions 11 through 17 on Form SS-4 do not apply to the applicant because he has no U.S. tax return filing requirement, such questions should be annotated "N/A". A foreign entity that completes Form SS-4 in the manner described above should be entered into IRS records as not having a filing requirement for any U.S. tax returns. However, if the foreign entity receives a letter from the IRS soliciting the filing of a U.S. tax return, the foreign entity should respond to the letter immediately by stating that it has no requirement to file any U.S. tax returns. Failure to respond to the IRS letter may result in a procedural assessment of tax by the IRS against the foreign entity. If the foreign entity later becomes liable to file a U.S. tax return, the foreign entity should not apply for a new EIN, but should instead use the EIN it was first issued on all U.S. tax returns filed thereafter.

To expedite the issuance of an EIN for a foreign entity, please call (267) 941-1099. This is not a toll-free call.

References/Related Topics

Page Last Reviewed or Updated: 17-Jan-2014

The How To Fill Out The 1040ez

How to fill out the 1040ez 3. How to fill out the 1040ez   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. How to fill out the 1040ez Leveraged leases. How to fill out the 1040ez Leveraged leases of limited-use property. How to fill out the 1040ez Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. How to fill out the 1040ez It also discusses how to treat other kinds of payments you make that are related to your use of this property. How to fill out the 1040ez These include payments you make for taxes on the property. How to fill out the 1040ez Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. How to fill out the 1040ez In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. How to fill out the 1040ez If you have or will receive equity in or title to the property, the rent is not deductible. How to fill out the 1040ez Unreasonable rent. How to fill out the 1040ez   You cannot take a rental deduction for unreasonable rent. How to fill out the 1040ez Ordinarily, the issue of reasonableness arises only if you and the lessor are related. How to fill out the 1040ez Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. How to fill out the 1040ez Rent is not unreasonable just because it is figured as a percentage of gross sales. How to fill out the 1040ez For examples of related persons, see Related persons in chapter 2, Publication 544. How to fill out the 1040ez Rent on your home. How to fill out the 1040ez   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. How to fill out the 1040ez You must meet the requirements for business use of your home. How to fill out the 1040ez For more information, see Business use of your home in chapter 1. How to fill out the 1040ez Rent paid in advance. How to fill out the 1040ez   Generally, rent paid in your trade or business is deductible in the year paid or accrued. How to fill out the 1040ez If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. How to fill out the 1040ez You can deduct the rest of your payment only over the period to which it applies. How to fill out the 1040ez Example 1. How to fill out the 1040ez You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. How to fill out the 1040ez Your rent is $12,000 per year. How to fill out the 1040ez You paid the first year's rent ($12,000) on June 30. How to fill out the 1040ez You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. How to fill out the 1040ez Example 2. How to fill out the 1040ez You are a calendar year taxpayer. How to fill out the 1040ez Last January you leased property for 3 years for $6,000 a year. How to fill out the 1040ez You paid the full $18,000 (3 × $6,000) during the first year of the lease. How to fill out the 1040ez Each year you can deduct only $6,000, the part of the lease that applies to that year. How to fill out the 1040ez Canceling a lease. How to fill out the 1040ez   You generally can deduct as rent an amount you pay to cancel a business lease. How to fill out the 1040ez Lease or purchase. How to fill out the 1040ez   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. How to fill out the 1040ez You must first determine whether your agreement is a lease or a conditional sales contract. How to fill out the 1040ez Payments made under a conditional sales contract are not deductible as rent expense. How to fill out the 1040ez Conditional sales contract. How to fill out the 1040ez   Whether an agreement is a conditional sales contract depends on the intent of the parties. How to fill out the 1040ez Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. How to fill out the 1040ez No single test, or special combination of tests, always applies. How to fill out the 1040ez However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. How to fill out the 1040ez The agreement applies part of each payment toward an equity interest you will receive. How to fill out the 1040ez You get title to the property after you make a stated amount of required payments. How to fill out the 1040ez The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. How to fill out the 1040ez You pay much more than the current fair rental value of the property. How to fill out the 1040ez You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. How to fill out the 1040ez Determine this value when you make the agreement. How to fill out the 1040ez You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. How to fill out the 1040ez The agreement designates part of the payments as interest, or that part is easy to recognize as interest. How to fill out the 1040ez Leveraged leases. How to fill out the 1040ez   Leveraged lease transactions may not be considered leases. How to fill out the 1040ez Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. How to fill out the 1040ez Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. How to fill out the 1040ez   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. How to fill out the 1040ez Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. How to fill out the 1040ez Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. How to fill out the 1040ez Internal Revenue Bulletin 2001-19 is available at www. How to fill out the 1040ez irs. How to fill out the 1040ez gov/pub/irs-irbs/irb01-19. How to fill out the 1040ez pdf. How to fill out the 1040ez   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. How to fill out the 1040ez The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. How to fill out the 1040ez The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. How to fill out the 1040ez The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. How to fill out the 1040ez The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. How to fill out the 1040ez The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. How to fill out the 1040ez   The IRS may charge you a user fee for issuing a tax ruling. How to fill out the 1040ez For more information, see Revenue Procedure 2014-1 available at  www. How to fill out the 1040ez irs. How to fill out the 1040ez gov/irb/2014-1_IRB/ar05. How to fill out the 1040ez html. How to fill out the 1040ez Leveraged leases of limited-use property. How to fill out the 1040ez   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. How to fill out the 1040ez Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. How to fill out the 1040ez See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. How to fill out the 1040ez Leases over $250,000. How to fill out the 1040ez   Special rules are provided for certain leases of tangible property. How to fill out the 1040ez The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. How to fill out the 1040ez Rents increase during the lease. How to fill out the 1040ez Rents decrease during the lease. How to fill out the 1040ez Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). How to fill out the 1040ez Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). How to fill out the 1040ez These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). How to fill out the 1040ez   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. How to fill out the 1040ez In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. How to fill out the 1040ez For details, see section 467 of the Internal Revenue Code. How to fill out the 1040ez Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. How to fill out the 1040ez When you can deduct these taxes as additional rent depends on your accounting method. How to fill out the 1040ez Cash method. How to fill out the 1040ez   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. How to fill out the 1040ez Accrual method. How to fill out the 1040ez   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. How to fill out the 1040ez That you have a liability for taxes on the leased property. How to fill out the 1040ez How much the liability is. How to fill out the 1040ez That economic performance occurred. How to fill out the 1040ez   The liability and amount of taxes are determined by state or local law and the lease agreement. How to fill out the 1040ez Economic performance occurs as you use the property. How to fill out the 1040ez Example 1. How to fill out the 1040ez Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. How to fill out the 1040ez Oak leases land for use in its business. How to fill out the 1040ez Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. How to fill out the 1040ez However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. How to fill out the 1040ez Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. How to fill out the 1040ez If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. How to fill out the 1040ez Oak cannot deduct the real estate taxes as rent until the tax bill is issued. How to fill out the 1040ez This is when Oak's liability under the lease becomes fixed. How to fill out the 1040ez Example 2. How to fill out the 1040ez The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. How to fill out the 1040ez As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. How to fill out the 1040ez This is the year in which Oak's liability under the lease becomes fixed. How to fill out the 1040ez Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. How to fill out the 1040ez Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. How to fill out the 1040ez If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. How to fill out the 1040ez For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. How to fill out the 1040ez The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. How to fill out the 1040ez Option to renew. How to fill out the 1040ez   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. How to fill out the 1040ez However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). How to fill out the 1040ez Allocate the lease cost to the original term and any option term based on the facts and circumstances. How to fill out the 1040ez In some cases, it may be appropriate to make the allocation using a present value computation. How to fill out the 1040ez For more information, see Regulations section 1. How to fill out the 1040ez 178-1(b)(5). How to fill out the 1040ez Example 1. How to fill out the 1040ez You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. How to fill out the 1040ez Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. How to fill out the 1040ez Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. How to fill out the 1040ez That is the remaining life of your present lease plus the periods for renewal. How to fill out the 1040ez Example 2. How to fill out the 1040ez The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. How to fill out the 1040ez You can amortize the entire $10,000 over the 20-year remaining life of the original lease. How to fill out the 1040ez The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). How to fill out the 1040ez Cost of a modification agreement. How to fill out the 1040ez   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. How to fill out the 1040ez You must capitalize these payments and amortize them over the remaining period of the lease. How to fill out the 1040ez You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. How to fill out the 1040ez Example. How to fill out the 1040ez You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. How to fill out the 1040ez However, before you occupy it, you decide that you really need less space. How to fill out the 1040ez The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. How to fill out the 1040ez In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. How to fill out the 1040ez   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. How to fill out the 1040ez Your amortization deduction each year will be $150 ($3,000 ÷ 20). How to fill out the 1040ez You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. How to fill out the 1040ez Commissions, bonuses, and fees. How to fill out the 1040ez   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. How to fill out the 1040ez You must amortize these costs over the term of the lease. How to fill out the 1040ez Loss on merchandise and fixtures. How to fill out the 1040ez   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. How to fill out the 1040ez You must capitalize the loss and amortize it over the remaining term of the lease. How to fill out the 1040ez Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). How to fill out the 1040ez Depreciate the property over its appropriate recovery period. How to fill out the 1040ez You cannot amortize the cost over the remaining term of the lease. How to fill out the 1040ez If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. How to fill out the 1040ez For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. How to fill out the 1040ez Assignment of a lease. How to fill out the 1040ez   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. How to fill out the 1040ez If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. How to fill out the 1040ez The rest is for your investment in the permanent improvements. How to fill out the 1040ez   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. How to fill out the 1040ez You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. How to fill out the 1040ez Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. How to fill out the 1040ez Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. How to fill out the 1040ez You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. How to fill out the 1040ez Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. How to fill out the 1040ez Uniform capitalization rules. How to fill out the 1040ez   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. How to fill out the 1040ez Produce real property or tangible personal property. How to fill out the 1040ez For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. How to fill out the 1040ez Acquire property for resale. How to fill out the 1040ez However, these rules do not apply to the following property. How to fill out the 1040ez Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. How to fill out the 1040ez Property you produce if you meet either of the following conditions. How to fill out the 1040ez Your indirect costs of producing the property are $200,000 or less. How to fill out the 1040ez You use the cash method of accounting and do not account for inventories. How to fill out the 1040ez Example 1. How to fill out the 1040ez You rent construction equipment to build a storage facility. How to fill out the 1040ez If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. How to fill out the 1040ez You recover your cost by claiming a deduction for depreciation on the building. How to fill out the 1040ez Example 2. How to fill out the 1040ez You rent space in a facility to conduct your business of manufacturing tools. How to fill out the 1040ez If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. How to fill out the 1040ez More information. How to fill out the 1040ez   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. How to fill out the 1040ez Prev  Up  Next   Home   More Online Publications