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Irs Form 1040 Ez Instructions

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Irs Form 1040 Ez Instructions

Irs form 1040 ez instructions 6. Irs form 1040 ez instructions   Retail Tax on Heavy Trucks, Trailers, and Tractors Table of Contents Highway vehicle. Irs form 1040 ez instructions Vehicles not considered highway vehicles. Irs form 1040 ez instructions Idling reduction device. Irs form 1040 ez instructions Separate purchase. Irs form 1040 ez instructions Leases. Irs form 1040 ez instructions Exported vehicle. Irs form 1040 ez instructions Tax on resale of tax-paid trailers and semitrailers. Irs form 1040 ez instructions Use treated as sale. Irs form 1040 ez instructions Sale. Irs form 1040 ez instructions Long-term lease. Irs form 1040 ez instructions Short-term lease. Irs form 1040 ez instructions Related person. Irs form 1040 ez instructions Exclusions from tax base. Irs form 1040 ez instructions Sales not at arm's length. Irs form 1040 ez instructions Installment sales. Irs form 1040 ez instructions Repairs and modifications. Irs form 1040 ez instructions Further manufacture. Irs form 1040 ez instructions Rail trailers and rail vans. Irs form 1040 ez instructions Parts and accessories. Irs form 1040 ez instructions Trash containers. Irs form 1040 ez instructions House trailers. Irs form 1040 ez instructions Camper coaches or bodies for self-propelled mobile homes. Irs form 1040 ez instructions Farm feed, seed, and fertilizer equipment. Irs form 1040 ez instructions Ambulances and hearses. Irs form 1040 ez instructions Truck-tractors. Irs form 1040 ez instructions Concrete mixers. Irs form 1040 ez instructions Registration requirement. Irs form 1040 ez instructions Further manufacture. Irs form 1040 ez instructions A tax of 12% of the sales price is imposed on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles. Irs form 1040 ez instructions Truck chassis and bodies. Irs form 1040 ez instructions Truck trailer and semitrailer chassis and bodies. Irs form 1040 ez instructions Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Irs form 1040 ez instructions A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it is equipped to tow a vehicle, such as a trailer or semitrailer. Irs form 1040 ez instructions A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. Irs form 1040 ez instructions A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. Irs form 1040 ez instructions A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. Irs form 1040 ez instructions The seller is liable for the tax. Irs form 1040 ez instructions Chassis or body. Irs form 1040 ez instructions   A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Irs form 1040 ez instructions Highway vehicle. Irs form 1040 ez instructions   A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. Irs form 1040 ez instructions Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. Irs form 1040 ez instructions A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following. Irs form 1040 ez instructions A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). Irs form 1040 ez instructions A special kind of cargo, goods, supplies, or materials. Irs form 1040 ez instructions Some off-highway task unrelated to highway transportation, except as discussed next. Irs form 1040 ez instructions Vehicles not considered highway vehicles. Irs form 1040 ez instructions   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax. Irs form 1040 ez instructions Specially designed mobile machinery for nontransportation functions. Irs form 1040 ez instructions A self-propelled vehicle is not a highway vehicle if all the following apply. Irs form 1040 ez instructions The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways. Irs form 1040 ez instructions The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation. Irs form 1040 ez instructions The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load. Irs form 1040 ez instructions Vehicles specially designed for off-highway transportation. Irs form 1040 ez instructions A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicles's capability to transport a load over a public highway is substantially limited or impaired. Irs form 1040 ez instructions To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. Irs form 1040 ez instructions It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. Irs form 1040 ez instructions Nontransportation trailers and semitrailers. Irs form 1040 ez instructions A trailer or semitrailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. Irs form 1040 ez instructions For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. Irs form 1040 ez instructions Gross vehicle weight. Irs form 1040 ez instructions   The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight (defined below) of 33,000 pounds or less. Irs form 1040 ez instructions It also does not apply to truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. Irs form 1040 ez instructions Tractors that have a gross vehicle weight of 19,500 pounds or less and a gross combined weight of 33,000 pounds or less are excluded from the 12% retail tax. Irs form 1040 ez instructions   The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax. Irs form 1040 ez instructions Platform truck bodies 21 feet or less in length. Irs form 1040 ez instructions Dry freight and refrigerated truck van bodies 24 feet or less in length. Irs form 1040 ez instructions Dump truck bodies with load capacities of 8 cubic yards or less. Irs form 1040 ez instructions Refuse packer truck bodies with load capacities of 20 cubic yards or less. Irs form 1040 ez instructions For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I. Irs form 1040 ez instructions R. Irs form 1040 ez instructions B. Irs form 1040 ez instructions 2005-14 at www. Irs form 1040 ez instructions irs. Irs form 1040 ez instructions gov/pub/irs-irbs/irb05-14. Irs form 1040 ez instructions pdf. Irs form 1040 ez instructions   The gross vehicle weight means the maximum total weight of a loaded vehicle. Irs form 1040 ez instructions Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. Irs form 1040 ez instructions The seller's gross vehicle weight rating is determined solely on the basis of the strength of the chassis frame and the axle capacity and placement. Irs form 1040 ez instructions The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. Irs form 1040 ez instructions See Regulations section 145. Irs form 1040 ez instructions 4051-1(e)(3) for more information. Irs form 1040 ez instructions Parts or accessories. Irs form 1040 ez instructions   The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. Irs form 1040 ez instructions For example, if at the time of the sale by the retailer, the part or accessory has been ordered from the retailer, the part or accessory will be considered as sold in connection with the sale of the vehicle. Irs form 1040 ez instructions The tax applies in this case whether or not the retailer bills the parts or accessories separately. Irs form 1040 ez instructions   If the retailer sells a taxable chassis, body, or tractor without parts or accessories considered essential for the operation or appearance of the taxable article, the sale of the parts or accessories by the retailer to the purchaser is considered made in connection with the sale of the taxable article even though they are shipped separately, at the same time, or on a different date. Irs form 1040 ez instructions The tax applies unless there is evidence to the contrary. Irs form 1040 ez instructions For example, if a retailer sells to any person a chassis and the bumpers for the chassis, or sells a taxable tractor and the fifth wheel and attachments, the tax applies to the parts or accessories regardless of the method of billing or the time at which the shipments were made. Irs form 1040 ez instructions The tax does not apply to parts and accessories that are spares or replacements. Irs form 1040 ez instructions   The tax imposed on parts and accessories sold on or in connection with the taxable articles listed earlier and the tax imposed on the separate purchase of parts and accessories (discussed next) for the taxable articles listed earlier do not apply to an idling reduction device or insulation that has an R value of at least R35 per inch. Irs form 1040 ez instructions Idling reduction device. Irs form 1040 ez instructions   An idling reduction device is any device or system of devices that provide the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. Irs form 1040 ez instructions The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary. Irs form 1040 ez instructions The EPA discusses idling reduction technologies on its website at www. Irs form 1040 ez instructions epa. Irs form 1040 ez instructions gov/smartway/technology/idling. Irs form 1040 ez instructions htm. Irs form 1040 ez instructions Separate purchase. Irs form 1040 ez instructions   The tax generally applies to the price of a part or accessory and its installation if the following conditions are met. Irs form 1040 ez instructions The owner, lessee, or operator of any vehicle that contains a taxable article installs any part or accessory on the vehicle. Irs form 1040 ez instructions The installation occurs within 6 months after the vehicle is first placed in service. Irs form 1040 ez instructions   The owners of the trade or business installing the parts or accessories are secondarily liable for the tax. Irs form 1040 ez instructions   A vehicle is placed in service on the date the owner takes actual possession of the vehicle. Irs form 1040 ez instructions This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner. Irs form 1040 ez instructions   The tax does not apply if the installed part or accessory is a replacement part or accessory. Irs form 1040 ez instructions The tax also does not apply if the total price of the parts and accessories, including installation charges, during the 6-month period is $1,000 or less. Irs form 1040 ez instructions However, if the total price is more than $1,000, the tax applies to the cost of all parts and accessories (and installation charges) during that period. Irs form 1040 ez instructions Example. Irs form 1040 ez instructions You bought a taxable vehicle and placed it in service on April 8. Irs form 1040 ez instructions On May 3, you bought and installed parts and accessories at a cost of $850. Irs form 1040 ez instructions On July 15, you bought and installed parts and accessories for $300. Irs form 1040 ez instructions Tax of $138 (12% of $1,150) applies on July 15. Irs form 1040 ez instructions Also, tax will apply to any costs of additional parts and accessories installed on the vehicle before October 8. Irs form 1040 ez instructions First retail sale defined. Irs form 1040 ez instructions   The sale of an article is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless one of the following exceptions applies. Irs form 1040 ez instructions There has been a prior taxable sale, lease, or use of the article (however, see Tax on resale of tax-paid trailers and semitrailers, later). Irs form 1040 ez instructions The sale qualifies as a tax-free sale under section 4221 (see Sales exempt from tax, later). Irs form 1040 ez instructions The seller in good faith accepts from the purchaser a statement signed under penalties of perjury and executed in good faith that the purchaser intends to resell the article or lease it on a long-term basis. Irs form 1040 ez instructions There is no registration requirement. Irs form 1040 ez instructions Leases. Irs form 1040 ez instructions   A long-term lease (a lease with a term of 1 year or more, taking into account options to renew) before a first retail sale is treated as a taxable sale. Irs form 1040 ez instructions The tax is imposed on the lessor at the time of the lease. Irs form 1040 ez instructions   A short-term lease (a lease with a term of less than 1 year, taking into account options to renew) before a first retail sale is treated as a taxable use. Irs form 1040 ez instructions The tax is imposed on the lessor at the time of the lease. Irs form 1040 ez instructions Exported vehicle. Irs form 1040 ez instructions   A vehicle exported before its first retail sale, used in a foreign country, and then returned to the United States is subject to the retail tax on its first domestic use or retail sale after importation. Irs form 1040 ez instructions Tax on resale of tax-paid trailers and semitrailers. Irs form 1040 ez instructions   The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. Irs form 1040 ez instructions The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. Irs form 1040 ez instructions The credit cannot exceed the tax on the resale. Irs form 1040 ez instructions See Regulations section 145. Irs form 1040 ez instructions 4052-1(a)(4) for information on the conditions to allowance for the credit. Irs form 1040 ez instructions Use treated as sale. Irs form 1040 ez instructions   If any person uses a taxable article before the first retail sale of the article, that person is liable for the tax as if the article had been sold at retail by that person. Irs form 1040 ez instructions Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. Irs form 1040 ez instructions The tax attaches when the use begins. Irs form 1040 ez instructions   If the seller of an article regularly sells the articles at retail in arm's-length transactions, figure the tax on its use on the lowest established retail price for the articles in effect at the time of the taxable use. Irs form 1040 ez instructions   If the seller of an article does not regularly sell the articles at retail in arm's-length transactions, a constructive price on which the tax is figured will be determined by the IRS after considering the selling practices and price structures of sellers of similar articles. Irs form 1040 ez instructions   If a seller of an article incurs liability for tax on the use of the article and later sells or leases the article in a transaction that otherwise would be taxable, liability for tax is not incurred on the later sale or lease. Irs form 1040 ez instructions Presumptive retail sales price. Irs form 1040 ez instructions   There are rules to ensure that the tax base of transactions considered to be taxable sales includes either an actual or presumed markup percentage. Irs form 1040 ez instructions If the person liable for tax is the vehicle's manufacturer, producer, or importer, the following discussions show how you figure the presumptive retail sales price depending on the type of transaction and the persons involved in the transaction. Irs form 1040 ez instructions Table 6-1 outlines the appropriate tax base calculation for various transactions. Irs form 1040 ez instructions   The presumed markup percentage to be used for trucks and truck-tractors is 4%. Irs form 1040 ez instructions But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero. Irs form 1040 ez instructions Sale. Irs form 1040 ez instructions   For a taxable sale by a manufacturer, producer, importer, or related person, you generally figure the tax on a tax base of the sales price plus an amount equal to the presumed markup percentage times that sales price. Irs form 1040 ez instructions Long-term lease. Irs form 1040 ez instructions   In the case of a long-term lease by a manufacturer, producer, importer, or related person, figure the tax on a tax base of the constructive sales price plus an amount equal to the presumed markup percentage times the constructive sales price. Irs form 1040 ez instructions Short-term lease. Irs form 1040 ez instructions   When a manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a constructive sales price at which those or similar articles generally are sold in the ordinary course of trade by retailers. Irs form 1040 ez instructions   But if the lessor in this situation regularly sells articles at retail in arm's-length transactions, figure the tax on the lowest established retail price in effect at the time of the taxable use. Irs form 1040 ez instructions   If a person other than the manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a tax base of the price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor and a presumed markup percentage. Irs form 1040 ez instructions Related person. Irs form 1040 ez instructions   A related person is any member of the same controlled group as the manufacturer, producer, or importer. Irs form 1040 ez instructions Do not treat as a related person a person that sells the articles through a permanent retail establishment in the normal course of being a retailer if that person has records to prove the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. Irs form 1040 ez instructions Table 6-1. Irs form 1040 ez instructions Tax Base IF the transaction is a. Irs form 1040 ez instructions . Irs form 1040 ez instructions . Irs form 1040 ez instructions THEN figuring the base by using the. Irs form 1040 ez instructions . Irs form 1040 ez instructions . Irs form 1040 ez instructions Sale by the manufacturer, producer, importer, or related person Sales price plus (presumed markup percentage × sales price) Sale by the dealer Total consideration paid for the item including any charges incident to placing it in a condition ready for use Long-term lease by the manufacturer, producer, importer, or related person Constructive sales price plus (presumed markup percentage × constructive sales price) Short-term lease by the manufacturer, producer, importer, or related person Constructive sales price at which such or similar articles are sold Short-term lease by a lessor other than the manufacturer, producer, importer, or related person Price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor plus a presumed markup percentage Short-term lease where the articles are regularly sold at arm's length Lowest established retail price in effect at the time of the taxable use General rule for sales by dealers to the consumer. Irs form 1040 ez instructions   For a taxable sale, other than a long-term lease, by a person other than a manufacturer, producer, importer, or related person, your tax base is the retail sales price as discussed next under Determination of tax base. Irs form 1040 ez instructions   When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. Irs form 1040 ez instructions However, you do add a markup if all the following apply. Irs form 1040 ez instructions You do not perform any significant activities relating to the processing of the sale of a taxable article. Irs form 1040 ez instructions The main reason for processing the sale through you is to avoid or evade the presumed markup. Irs form 1040 ez instructions You do not have records proving that the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. Irs form 1040 ez instructions In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price. Irs form 1040 ez instructions Determination of tax base. Irs form 1040 ez instructions   These rules apply to both normal retail sales price and presumptive retail sales price computations. Irs form 1040 ez instructions To arrive at the tax base, the price is the total consideration paid (including trade-in allowance) for the item and includes any charge incident to placing the article in a condition ready for use. Irs form 1040 ez instructions However, see Presumptive retail sales price, earlier. Irs form 1040 ez instructions Exclusions from tax base. Irs form 1040 ez instructions   Exclude from the tax base the retail excise tax imposed on the sale. Irs form 1040 ez instructions Exclude any state or local retail sales tax if stated as a separate charge from the price whether the sales tax is imposed on the seller or purchaser. Irs form 1040 ez instructions Also exclude the value of any used component of the article furnished by the first user of the article. Irs form 1040 ez instructions   Exclude charges for transportation, delivery, insurance, and installation (other than installation charges for parts and accessories, discussed earlier) and other expenses incurred in connection with the delivery of an article to a purchaser. Irs form 1040 ez instructions These expenses are those incurred in delivery from the retail dealer to the customer. Irs form 1040 ez instructions In the case of delivery directly from the manufacturer to the dealer's customer, include the transportation and delivery charges to the extent the charges do not exceed what it would have cost to ship the article to the dealer. Irs form 1040 ez instructions   Exclude amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, provided those charges are supported by adequate records. Irs form 1040 ez instructions For example, for an industrial vacuum loader vehicle, exclude amounts charged for the vacuum pump and hose, filter system, material separator, silencer or muffler, control cabinet, and ladder. Irs form 1040 ez instructions Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe. Irs form 1040 ez instructions Sales not at arm's length. Irs form 1040 ez instructions   For any taxable article sold (not at arm's length) at less than the fair market price, figure the excise tax on the price for which similar articles are sold at retail in the ordinary course of trade. Irs form 1040 ez instructions   A sale is not at arm's length if either of the following apply. Irs form 1040 ez instructions One of the parties is controlled (in law or in fact) by the other or there is common control, whether or not the control is actually exercised to influence the sales price. Irs form 1040 ez instructions The sale is made under special arrangements between a seller and a purchaser. Irs form 1040 ez instructions Installment sales. Irs form 1040 ez instructions   If the first retail sale is an installment sale, or other form of sale in which the sales price is paid in installments, tax liability arises at the time of the sale. Irs form 1040 ez instructions The tax is figured on the entire sales price. Irs form 1040 ez instructions No part of the tax is deferred because the sales price is paid in installments. Irs form 1040 ez instructions Repairs and modifications. Irs form 1040 ez instructions   The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75% of the retail price of a comparable new article. Irs form 1040 ez instructions This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. Irs form 1040 ez instructions However, this exception generally does not apply to an article that was not subject to the tax when it was new. Irs form 1040 ez instructions Further manufacture. Irs form 1040 ez instructions   The tax does not apply to the use by a person of a taxable article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by that person. Irs form 1040 ez instructions Do not treat a person as engaged in the manufacture of any article merely because that person combines the article with a: Coupling device (including any fifth wheel); Wrecker crane; Loading and unloading equipment (including any crane, hoist, winch, or power liftgate); Aerial ladder or tower; Ice and snow control equipment; Earth moving, excavation, and construction equipment; Spreader; Sleeper cab; Cab shield; or Wood or metal floor. Irs form 1040 ez instructions Combining an article with an item in this list does not give rise to taxability. Irs form 1040 ez instructions However, see Parts or accessories discussed earlier. Irs form 1040 ez instructions Articles exempt from tax. Irs form 1040 ez instructions   The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions. Irs form 1040 ez instructions Rail trailers and rail vans. Irs form 1040 ez instructions   This is any chassis or body of a trailer or semitrailer designed for use both as a highway vehicle and a railroad car (including any parts and accessories designed primarily for use on and in connection with it). Irs form 1040 ez instructions Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car. Irs form 1040 ez instructions Parts and accessories. Irs form 1040 ez instructions   This is any part or accessory sold separately from the truck or trailer, except as described earlier under Parts or accessories and Separate purchase. Irs form 1040 ez instructions Trash containers. Irs form 1040 ez instructions   This is any box, container, receptacle, bin, or similar article that meets all the following conditions. Irs form 1040 ez instructions It is designed to be used as a trash container. Irs form 1040 ez instructions It is not designed to carry freight other than trash. Irs form 1040 ez instructions It is not designed to be permanently mounted on or affixed to a truck chassis or body. Irs form 1040 ez instructions House trailers. Irs form 1040 ez instructions   This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks. Irs form 1040 ez instructions Camper coaches or bodies for self-propelled mobile homes. Irs form 1040 ez instructions   This is any article designed to be mounted or placed on trucks, truck chassis, or automobile chassis and to be used primarily as living quarters or camping accommodations. Irs form 1040 ez instructions Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies. Irs form 1040 ez instructions Farm feed, seed, and fertilizer equipment. Irs form 1040 ez instructions   This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. Irs form 1040 ez instructions This exemption applies only to the farm equipment body (and parts and accessories) and not to the chassis upon which the farm equipment is mounted. Irs form 1040 ez instructions Ambulances and hearses. Irs form 1040 ez instructions   This is any ambulance, hearse, or combination ambulance-hearse. Irs form 1040 ez instructions Truck-tractors. Irs form 1040 ez instructions   This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals. Irs form 1040 ez instructions Concrete mixers. Irs form 1040 ez instructions   This is any article designed to be placed or mounted on a truck, truck trailer, or semitrailer chassis to be used to process or prepare concrete. Irs form 1040 ez instructions This exemption does not apply to the chassis on which the article is mounted. Irs form 1040 ez instructions Sales exempt from tax. Irs form 1040 ez instructions   The following sales are ordinarily exempt from tax. Irs form 1040 ez instructions Sales to a state or local government for its exclusive use. Irs form 1040 ez instructions Sales to Indian tribal governments, but only if the transaction involves the exercise of an essential tribal government function. Irs form 1040 ez instructions Sales to a nonprofit educational organization for its exclusive use. Irs form 1040 ez instructions Sales to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. Irs form 1040 ez instructions Sales for use by the purchaser for further manufacture of other taxable articles (see below). Irs form 1040 ez instructions Sales for export or for resale by the purchaser to a second purchaser for export. Irs form 1040 ez instructions Sales to the United Nations for official use. Irs form 1040 ez instructions Registration requirement. Irs form 1040 ez instructions   In general, the seller and buyer must be registered for a sale to be tax free. Irs form 1040 ez instructions See the Form 637 instructions for more information. Irs form 1040 ez instructions Certain registration exceptions apply in the case of sales to state and local governments, sales to foreign purchasers for export, and sales for resale or long term leasing. Irs form 1040 ez instructions Further manufacture. Irs form 1040 ez instructions   If you buy articles tax free and resell or use them other than in the manufacture of another article, you are liable for the tax on their resale or use just as if you had manufactured and made the first retail sale of them. Irs form 1040 ez instructions Credits or refunds. Irs form 1040 ez instructions   A credit or refund (without interest) of the retail tax on the taxable articles described earlier may be allowable if the tax has been paid with respect to an article and, before any other use, such article is used by any person as a component part of another taxable article manufactured or produced. Irs form 1040 ez instructions The person using the article as a component part is eligible for the credit or refund. Irs form 1040 ez instructions   A credit or refund is allowable if, before any other use, an article is, by any person: Exported, Used or sold for use as supplies for vessels, Sold to a state or local government for its exclusive use, Sold to a nonprofit educational organization for its exclusive use, or Sold to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. Irs form 1040 ez instructions A credit or refund is also allowable if there is a price readjustment by reason of the return or repossession of an article or by reason of a bona fide discount, rebate, or allowance. Irs form 1040 ez instructions   See also Conditions to allowance in chapter 5. Irs form 1040 ez instructions Tire credit. Irs form 1040 ez instructions   A credit is allowed against the retail tax on the taxable articles described earlier if taxable tires are sold on or in connection with the sale of the article. Irs form 1040 ez instructions The credit is equal to the manufacturers excise tax imposed on the taxable tires (discussed earlier). Irs form 1040 ez instructions This is the section 4051(d) taxable tire credit and is claimed on Schedule C (Form 720) for the same quarter for which the tax on the heavy vehicle is reported. Irs form 1040 ez instructions Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 10-Mar-2014

The Irs Form 1040 Ez Instructions

Irs form 1040 ez instructions Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. Irs form 1040 ez instructions Employee-owners. Irs form 1040 ez instructions Other rules. Irs form 1040 ez instructions Other rules. Irs form 1040 ez instructions Property Exchanged for StockNonqualified preferred stock. Irs form 1040 ez instructions Liabilities. Irs form 1040 ez instructions Election to reduce basis. Irs form 1040 ez instructions Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Real Property Interest Accounting MethodsSection 481(a) adjustment. Irs form 1040 ez instructions Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. Irs form 1040 ez instructions Business formed before 1997. Irs form 1040 ez instructions   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. Irs form 1040 ez instructions Business formed after 1996. Irs form 1040 ez instructions   The following businesses formed after 1996 are taxed as corporations. Irs form 1040 ez instructions A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. Irs form 1040 ez instructions A business formed under a state law that refers to it as a joint-stock company or joint-stock association. Irs form 1040 ez instructions An insurance company. Irs form 1040 ez instructions Certain banks. Irs form 1040 ez instructions A business wholly owned by a state or local government. Irs form 1040 ez instructions A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Irs form 1040 ez instructions Certain foreign businesses. Irs form 1040 ez instructions Any other business that elects to be taxed as a corporation. Irs form 1040 ez instructions For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. Irs form 1040 ez instructions For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. Irs form 1040 ez instructions S corporations. Irs form 1040 ez instructions   Some corporations may meet the qualifications for electing to be S corporations. Irs form 1040 ez instructions For information on S corporations, see the instructions for Form 1120S, U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Income Tax Return for an S Corporation. Irs form 1040 ez instructions Personal service corporations. Irs form 1040 ez instructions   A corporation is a personal service corporation if it meets all of the following requirements. Irs form 1040 ez instructions Its principal activity during the “testing period” is performing personal services (defined later). Irs form 1040 ez instructions Generally, the testing period for any tax year is the prior tax year. Irs form 1040 ez instructions If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. Irs form 1040 ez instructions Its employee-owners substantially perform the services in (1), above. Irs form 1040 ez instructions This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. Irs form 1040 ez instructions Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. Irs form 1040 ez instructions Personal services. Irs form 1040 ez instructions   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. Irs form 1040 ez instructions Employee-owners. Irs form 1040 ez instructions   A person is an employee-owner of a personal service corporation if both of the following apply. Irs form 1040 ez instructions He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. Irs form 1040 ez instructions He or she owns any stock in the corporation at any time during the testing period. Irs form 1040 ez instructions Other rules. Irs form 1040 ez instructions   For other rules that apply to personal service corporations see Accounting Periods, later. Irs form 1040 ez instructions Closely held corporations. Irs form 1040 ez instructions   A corporation is closely held if all of the following apply. Irs form 1040 ez instructions It is not a personal service corporation. Irs form 1040 ez instructions At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. Irs form 1040 ez instructions “Individual” includes certain trusts and private foundations. Irs form 1040 ez instructions Other rules. Irs form 1040 ez instructions   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. Irs form 1040 ez instructions Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. Irs form 1040 ez instructions This rule applies both to individuals and to groups who transfer property to a corporation. Irs form 1040 ez instructions It also applies whether the corporation is being formed or is already operating. Irs form 1040 ez instructions It does not apply in the following situations. Irs form 1040 ez instructions The corporation is an investment company. Irs form 1040 ez instructions You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. Irs form 1040 ez instructions The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. Irs form 1040 ez instructions Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. Irs form 1040 ez instructions For more information, see section 1. Irs form 1040 ez instructions 351-3 of the Regulations. Irs form 1040 ez instructions Control of a corporation. Irs form 1040 ez instructions   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. Irs form 1040 ez instructions Example 1. Irs form 1040 ez instructions You and Bill Jones buy property for $100,000. Irs form 1040 ez instructions You both organize a corporation when the property has a fair market value of $300,000. Irs form 1040 ez instructions You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. Irs form 1040 ez instructions No gain is recognized by you, Bill, or the corporation. Irs form 1040 ez instructions Example 2. Irs form 1040 ez instructions You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. Irs form 1040 ez instructions This represents only 75% of each class of stock of the corporation. Irs form 1040 ez instructions The other 25% was already issued to someone else. Irs form 1040 ez instructions You and Bill recognize a taxable gain of $200,000 on the transaction. Irs form 1040 ez instructions Services rendered. Irs form 1040 ez instructions   The term property does not include services rendered or to be rendered to the issuing corporation. Irs form 1040 ez instructions The value of stock received for services is income to the recipient. Irs form 1040 ez instructions Example. Irs form 1040 ez instructions You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Irs form 1040 ez instructions Right after the exchange, you own 85% of the outstanding stock. Irs form 1040 ez instructions No gain is recognized on the exchange of property. Irs form 1040 ez instructions However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. Irs form 1040 ez instructions Property of relatively small value. Irs form 1040 ez instructions   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Irs form 1040 ez instructions   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. Irs form 1040 ez instructions Stock received in disproportion to property transferred. Irs form 1040 ez instructions   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. Irs form 1040 ez instructions If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. Irs form 1040 ez instructions It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. Irs form 1040 ez instructions Money or other property received. Irs form 1040 ez instructions   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. Irs form 1040 ez instructions You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Irs form 1040 ez instructions The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. Irs form 1040 ez instructions If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. Irs form 1040 ez instructions See chapter 3 of Publication 544. Irs form 1040 ez instructions No loss is recognized. Irs form 1040 ez instructions Nonqualified preferred stock. Irs form 1040 ez instructions   Nonqualified preferred stock is treated as property other than stock. Irs form 1040 ez instructions Generally, it is preferred stock with any of the following features. Irs form 1040 ez instructions The holder has the right to require the issuer or a related person to redeem or buy the stock. Irs form 1040 ez instructions The issuer or a related person is required to redeem or buy the stock. Irs form 1040 ez instructions The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. Irs form 1040 ez instructions The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. Irs form 1040 ez instructions For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. Irs form 1040 ez instructions Liabilities. Irs form 1040 ez instructions   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. Irs form 1040 ez instructions There are two exceptions to this treatment. Irs form 1040 ez instructions If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. Irs form 1040 ez instructions However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. Irs form 1040 ez instructions If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. Irs form 1040 ez instructions For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. Irs form 1040 ez instructions Example. Irs form 1040 ez instructions You transfer property to a corporation for stock. Irs form 1040 ez instructions Immediately after the transfer, you control the corporation. Irs form 1040 ez instructions You also receive $10,000 in the exchange. Irs form 1040 ez instructions Your adjusted basis in the transferred property is $20,000. Irs form 1040 ez instructions The stock you receive has a fair market value (FMV) of $16,000. Irs form 1040 ez instructions The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. Irs form 1040 ez instructions Gain is realized as follows. Irs form 1040 ez instructions FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. Irs form 1040 ez instructions The recognized gain is limited to $10,000, the cash received. Irs form 1040 ez instructions Loss on exchange. Irs form 1040 ez instructions   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. Irs form 1040 ez instructions For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Irs form 1040 ez instructions Basis of stock or other property received. Irs form 1040 ez instructions   The basis of the stock you receive is generally the adjusted basis of the property you transfer. Irs form 1040 ez instructions Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. Irs form 1040 ez instructions Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. Irs form 1040 ez instructions Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. Irs form 1040 ez instructions    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. Irs form 1040 ez instructions This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. Irs form 1040 ez instructions The basis of any other property you receive is its fair market value on the date of the trade. Irs form 1040 ez instructions Basis of property transferred. Irs form 1040 ez instructions   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. Irs form 1040 ez instructions However, the increase for the gain recognized may be limited. Irs form 1040 ez instructions For more information, see section 362 of the Internal Revenue Code. Irs form 1040 ez instructions Election to reduce basis. Irs form 1040 ez instructions   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. Irs form 1040 ez instructions The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. Irs form 1040 ez instructions However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. Irs form 1040 ez instructions R. Irs form 1040 ez instructions B. Irs form 1040 ez instructions 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. Irs form 1040 ez instructions    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. Irs form 1040 ez instructions Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. Irs form 1040 ez instructions Paid-in capital. Irs form 1040 ez instructions   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. Irs form 1040 ez instructions These contributions are not taxable to the corporation. Irs form 1040 ez instructions Basis. Irs form 1040 ez instructions   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. Irs form 1040 ez instructions However, the increase for the gain recognized may be limited. Irs form 1040 ez instructions For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. Irs form 1040 ez instructions   The basis of property contributed to capital by a person other than a shareholder is zero. Irs form 1040 ez instructions   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. Irs form 1040 ez instructions If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. Irs form 1040 ez instructions Depreciable property. Irs form 1040 ez instructions Amortizable property. Irs form 1040 ez instructions Property subject to cost depletion but not to percentage depletion. Irs form 1040 ez instructions All other remaining properties. Irs form 1040 ez instructions   Reduce the basis of property in each category to zero before going on to the next category. Irs form 1040 ez instructions   There may be more than one piece of property in each category. Irs form 1040 ez instructions Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. Irs form 1040 ez instructions The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. Irs form 1040 ez instructions Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. Irs form 1040 ez instructions A corporation generally must make estimated tax payments as it earns or receives income during its tax year. Irs form 1040 ez instructions After the end of the year, the corporation must file an income tax return. Irs form 1040 ez instructions This section will help you determine when and how to pay and file corporate income taxes. Irs form 1040 ez instructions For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. Irs form 1040 ez instructions The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. Irs form 1040 ez instructions For more information, visit www. Irs form 1040 ez instructions irs. Irs form 1040 ez instructions gov/newsroom/article/0,,id=108362. Irs form 1040 ez instructions 00. Irs form 1040 ez instructions Income Tax Return This section will help you determine when and how to report a corporation's income tax. Irs form 1040 ez instructions Who must file. Irs form 1040 ez instructions   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Irs form 1040 ez instructions Which form to file. Irs form 1040 ez instructions   A corporation generally must file Form 1120, U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. Irs form 1040 ez instructions Certain organizations and entities must file special returns. Irs form 1040 ez instructions For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. Irs form 1040 ez instructions Electronic filing. Irs form 1040 ez instructions   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. Irs form 1040 ez instructions Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. Irs form 1040 ez instructions However, in certain instances, these corporations can request a waiver. Irs form 1040 ez instructions For more information regarding electronic filing, visit www. Irs form 1040 ez instructions irs. Irs form 1040 ez instructions gov/efile. Irs form 1040 ez instructions When to file. Irs form 1040 ez instructions   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. Irs form 1040 ez instructions A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. Irs form 1040 ez instructions A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. Irs form 1040 ez instructions Example 1. Irs form 1040 ez instructions A corporation's tax year ends December 31. Irs form 1040 ez instructions It must file its income tax return by March 15th. Irs form 1040 ez instructions Example 2. Irs form 1040 ez instructions A corporation's tax year ends June 30. Irs form 1040 ez instructions It must file its income tax return by September 15th. Irs form 1040 ez instructions   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. Irs form 1040 ez instructions Extension of time to file. Irs form 1040 ez instructions   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. Irs form 1040 ez instructions The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. Irs form 1040 ez instructions   Form 7004 does not extend the time for paying the tax due on the return. Irs form 1040 ez instructions Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. Irs form 1040 ez instructions The interest is figured from the original due date of the return to the date of payment. Irs form 1040 ez instructions   For more information, see the instructions for Form 7004. Irs form 1040 ez instructions How to pay your taxes. Irs form 1040 ez instructions   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. Irs form 1040 ez instructions Electronic Federal Tax Payment System (EFTPS). Irs form 1040 ez instructions   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). Irs form 1040 ez instructions For more information on EFTPS and enrollment, visit www. Irs form 1040 ez instructions eftps. Irs form 1040 ez instructions gov or call 1-800-555-4477. Irs form 1040 ez instructions Also see Publication 966, The Secure Way to Pay Your Federal Taxes. Irs form 1040 ez instructions Note. Irs form 1040 ez instructions Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. Irs form 1040 ez instructions Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Irs form 1040 ez instructions Do not attach an explanation when the corporation's return is filed. Irs form 1040 ez instructions See the instructions for your income tax return. Irs form 1040 ez instructions Late filing of return. Irs form 1040 ez instructions    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. Irs form 1040 ez instructions If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. Irs form 1040 ez instructions The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. Irs form 1040 ez instructions The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. Irs form 1040 ez instructions Late payment of tax. Irs form 1040 ez instructions    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Irs form 1040 ez instructions The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. Irs form 1040 ez instructions Trust fund recovery penalty. Irs form 1040 ez instructions   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Irs form 1040 ez instructions The penalty is the full amount of the unpaid trust fund tax. Irs form 1040 ez instructions This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. Irs form 1040 ez instructions   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. Irs form 1040 ez instructions   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. Irs form 1040 ez instructions A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. Irs form 1040 ez instructions   Willfully means voluntarily, consciously, and intentionally. Irs form 1040 ez instructions A responsible person acts willfully if the person knows the required actions are not taking place. Irs form 1040 ez instructions   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. Irs form 1040 ez instructions Other penalties. Irs form 1040 ez instructions   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. Irs form 1040 ez instructions See sections 6662, 6662A, and 6663 of the Internal Revenue Code. Irs form 1040 ez instructions Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Irs form 1040 ez instructions If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. Irs form 1040 ez instructions This section will explain how to avoid this penalty. Irs form 1040 ez instructions When to pay estimated tax. Irs form 1040 ez instructions   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Irs form 1040 ez instructions Example 1. Irs form 1040 ez instructions Your corporation's tax year ends December 31. Irs form 1040 ez instructions Installment payments are due on April 15, June 15, September 15, and December 15. Irs form 1040 ez instructions Example 2. Irs form 1040 ez instructions Your corporation's tax year ends June 30. Irs form 1040 ez instructions Installment payments are due on October 15, December 15, March 15, and June 15. Irs form 1040 ez instructions   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. Irs form 1040 ez instructions How to figure each required installment. Irs form 1040 ez instructions   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. Irs form 1040 ez instructions You will generally use one of the following two methods to figure each required installment. Irs form 1040 ez instructions You should use the method that yields the smallest installment payments. Irs form 1040 ez instructions Note. Irs form 1040 ez instructions In these discussions, “return” generally refers to the corporation's original return. Irs form 1040 ez instructions However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Irs form 1040 ez instructions Method 1. Irs form 1040 ez instructions   Each required installment is 25% of the income tax the corporation will show on its return for the current year. Irs form 1040 ez instructions Method 2. Irs form 1040 ez instructions   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. Irs form 1040 ez instructions   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). Irs form 1040 ez instructions Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. Irs form 1040 ez instructions   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. Irs form 1040 ez instructions Other methods. Irs form 1040 ez instructions   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. Irs form 1040 ez instructions The annualized income installment method. Irs form 1040 ez instructions The adjusted seasonal installment method. Irs form 1040 ez instructions Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. Irs form 1040 ez instructions Refiguring required installments. Irs form 1040 ez instructions   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. Irs form 1040 ez instructions An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. Irs form 1040 ez instructions Underpayment penalty. Irs form 1040 ez instructions   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. Irs form 1040 ez instructions The penalty is figured separately for each installment due date. Irs form 1040 ez instructions The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. Irs form 1040 ez instructions This is true even if the corporation is due a refund when its return is filed. Irs form 1040 ez instructions Form 2220. Irs form 1040 ez instructions   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. Irs form 1040 ez instructions   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. Irs form 1040 ez instructions The amount of the underpayment. Irs form 1040 ez instructions The period during which the underpayment was due and unpaid. Irs form 1040 ez instructions The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. Irs form 1040 ez instructions   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. Irs form 1040 ez instructions However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. Irs form 1040 ez instructions The annualized income installment method was used to figure any required installment. Irs form 1040 ez instructions The adjusted seasonal installment method was used to figure any required installment. Irs form 1040 ez instructions The corporation is a large corporation figuring its first required installment based on the prior year's tax. Irs form 1040 ez instructions How to pay estimated tax. Irs form 1040 ez instructions   A corporation is generally required to use EFTPS to pay its taxes. Irs form 1040 ez instructions See Electronic Federal Tax Payment System (EFTPS), earlier. Irs form 1040 ez instructions Also see the Instructions for Form 1120-W. Irs form 1040 ez instructions Quick refund of overpayments. Irs form 1040 ez instructions   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Irs form 1040 ez instructions Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. Irs form 1040 ez instructions A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. Irs form 1040 ez instructions Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. Irs form 1040 ez instructions File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. Irs form 1040 ez instructions Do not file Form 4466 before the end of the corporation's tax year. Irs form 1040 ez instructions An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. Irs form 1040 ez instructions The IRS will act on the form within 45 days from the date you file it. Irs form 1040 ez instructions U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Real Property Interest If a domestic corporation acquires a U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. Irs form 1040 ez instructions The amount paid includes cash, the fair market value of other property, and any assumed liability. Irs form 1040 ez instructions If a domestic corporation distributes a U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. Irs form 1040 ez instructions A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. Irs form 1040 ez instructions For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Withholding Tax Return for Dispositions by Foreign Persons of U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Real Property Interests. Irs form 1040 ez instructions Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Irs form 1040 ez instructions Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. Irs form 1040 ez instructions In all cases, the method used must clearly show taxable income. Irs form 1040 ez instructions Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. Irs form 1040 ez instructions Accrual method. Irs form 1040 ez instructions   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. Irs form 1040 ez instructions A corporation engaged in farming operations also must use the accrual method. Irs form 1040 ez instructions   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. Irs form 1040 ez instructions However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. Irs form 1040 ez instructions   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. Irs form 1040 ez instructions   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. Irs form 1040 ez instructions   There are exceptions to the economic performance rule for certain items, including recurring expenses. Irs form 1040 ez instructions See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. Irs form 1040 ez instructions Nonaccrual experience method. Irs form 1040 ez instructions   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. Irs form 1040 ez instructions   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. Irs form 1040 ez instructions Percentage of completion method. Irs form 1040 ez instructions   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. Irs form 1040 ez instructions Mark-to-market accounting method. Irs form 1040 ez instructions   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Irs form 1040 ez instructions Under this method any security held by a dealer as inventory must be included in inventory at its FMV. Irs form 1040 ez instructions Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. Irs form 1040 ez instructions Any gain or loss must be taken into account in determining gross income. Irs form 1040 ez instructions The gain or loss taken into account is treated as ordinary gain or loss. Irs form 1040 ez instructions   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. Irs form 1040 ez instructions Change in accounting method. Irs form 1040 ez instructions   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). Irs form 1040 ez instructions The corporation must file Form 3115, Application for Change in Accounting Method. Irs form 1040 ez instructions For more information, see Form 3115 and Publication 538. Irs form 1040 ez instructions Section 481(a) adjustment. Irs form 1040 ez instructions   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. Irs form 1040 ez instructions The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. Irs form 1040 ez instructions However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. Irs form 1040 ez instructions The corporation must complete the appropriate lines of Form 3115 to make the election. Irs form 1040 ez instructions See the Instructions for Form 3115. Irs form 1040 ez instructions Accounting Periods A corporation must figure its taxable income on the basis of a tax year. Irs form 1040 ez instructions A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Irs form 1040 ez instructions Generally, corporations can use either a calendar year or a fiscal year as its tax year. Irs form 1040 ez instructions Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. Irs form 1040 ez instructions For more information, see Publication 538. Irs form 1040 ez instructions Personal service corporation. Irs form 1040 ez instructions   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. Irs form 1040 ez instructions See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. Irs form 1040 ez instructions Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. Irs form 1040 ez instructions   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. Irs form 1040 ez instructions See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. Irs form 1040 ez instructions Change of tax year. Irs form 1040 ez instructions   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. Irs form 1040 ez instructions However, under certain conditions, a corporation can change its tax year without getting the consent. Irs form 1040 ez instructions For more information, see Form 1128 and Publication 538. Irs form 1040 ez instructions Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Irs form 1040 ez instructions Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Irs form 1040 ez instructions Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. Irs form 1040 ez instructions The corporation should keep copies of all filed returns. Irs form 1040 ez instructions They help in preparing future and amended returns and in the calculation of earnings and profits. Irs form 1040 ez instructions Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. Irs form 1040 ez instructions However, the following special provisions apply only to corporations. Irs form 1040 ez instructions Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. Irs form 1040 ez instructions However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Irs form 1040 ez instructions Any costs not deducted can be amortized. Irs form 1040 ez instructions Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Irs form 1040 ez instructions Organizational costs are the direct costs of creating the corporation. Irs form 1040 ez instructions For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. Irs form 1040 ez instructions Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. Irs form 1040 ez instructions Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. Irs form 1040 ez instructions Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Irs form 1040 ez instructions If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. Irs form 1040 ez instructions These rules also deny the deduction of losses on the sale or exchange of property between related persons. Irs form 1040 ez instructions Related persons. Irs form 1040 ez instructions   For purposes of this rule, the following persons are related to a corporation. Irs form 1040 ez instructions Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). Irs form 1040 ez instructions An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Irs form 1040 ez instructions A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Irs form 1040 ez instructions An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Irs form 1040 ez instructions A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Irs form 1040 ez instructions Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. Irs form 1040 ez instructions Ownership of stock. Irs form 1040 ez instructions   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. Irs form 1040 ez instructions Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. Irs form 1040 ez instructions An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Irs form 1040 ez instructions Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. Irs form 1040 ez instructions Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. Irs form 1040 ez instructions To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. Irs form 1040 ez instructions But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. Irs form 1040 ez instructions Reallocation of income and deductions. Irs form 1040 ez instructions   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. Irs form 1040 ez instructions Complete liquidations. Irs form 1040 ez instructions   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. Irs form 1040 ez instructions More information. Irs form 1040 ez instructions   For more information about the related person rules, see Publication 544. Irs form 1040 ez instructions Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. Irs form 1040 ez instructions If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. Irs form 1040 ez instructions Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. Irs form 1040 ez instructions A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. Irs form 1040 ez instructions A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. Irs form 1040 ez instructions For more information regarding the election, see Form 8902. Irs form 1040 ez instructions Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. Irs form 1040 ez instructions The deduction is allowed for the year in which the property is placed in service. Irs form 1040 ez instructions A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. Irs form 1040 ez instructions For more information, see section 179C of the Internal Revenue Code and the related Regulations. Irs form 1040 ez instructions Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). Irs form 1040 ez instructions A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. Irs form 1040 ez instructions For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. Irs form 1040 ez instructions Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. Irs form 1040 ez instructions In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. Irs form 1040 ez instructions 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. Irs form 1040 ez instructions The deduction is limited to $1. Irs form 1040 ez instructions 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. Irs form 1040 ez instructions Other rules and limitations apply. Irs form 1040 ez instructions The corporation must reduce the basis of any property by any deduction taken. Irs form 1040 ez instructions The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. Irs form 1040 ez instructions For more information, see section 179D of the Internal Revenue Code. Irs form 1040 ez instructions Also see Notice 2006-52, 2006-26 I. Irs form 1040 ez instructions R. Irs form 1040 ez instructions B. Irs form 1040 ez instructions 1175, clarified and amplified by Notice 2008-40, 2008-14 I. Irs form 1040 ez instructions R. Irs form 1040 ez instructions B. Irs form 1040 ez instructions 725, and any successor. Irs form 1040 ez instructions Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. Irs form 1040 ez instructions These items are known as corporate preference items and they include the following. Irs form 1040 ez instructions Gain on the disposition of section 1250 property. Irs form 1040 ez instructions For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Irs form 1040 ez instructions Percentage depletion for iron ore and coal (including lignite). Irs form 1040 ez instructions For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. Irs form 1040 ez instructions Amortization of pollution control facilities. Irs form 1040 ez instructions For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. Irs form 1040 ez instructions Mineral exploration and development costs. Irs form 1040 ez instructions For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. Irs form 1040 ez instructions For more information on corporate preference items, see section 291 of the Internal Revenue Code. Irs form 1040 ez instructions Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. Irs form 1040 ez instructions This section discusses the general rules that apply. Irs form 1040 ez instructions The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. Irs form 1040 ez instructions For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. Irs form 1040 ez instructions Dividends from domestic corporations. Irs form 1040 ez instructions   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. Irs form 1040 ez instructions If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. Irs form 1040 ez instructions Ownership. Irs form 1040 ez instructions   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. Irs form 1040 ez instructions Small business investment companies. Irs form 1040 ez instructions   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. Irs form 1040 ez instructions Dividends from regulated investment companies. Irs form 1040 ez instructions   Regulated investment company dividends received are subject to certain limits. Irs form 1040 ez instructions Capital gain dividends received from a regulated investment company do not qualify for the deduction. Irs form 1040 ez instructions For more information, see section 854 of the Internal Revenue Code. Irs form 1040 ez instructions No deduction allowed for certain dividends. Irs form 1040 ez instructions   Corporations cannot take a deduction for dividends received from the following entities. Irs form 1040 ez instructions A real estate investment trust (REIT). Irs form 1040 ez instructions A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. Irs form 1040 ez instructions A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Irs form 1040 ez instructions Ex-dividend means the holder has no rights to the dividend. Irs form 1040 ez instructions A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. Irs form 1040 ez instructions Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Irs form 1040 ez instructions Dividends on deposits. Irs form 1040 ez instructions   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. Irs form 1040 ez instructions They do not qualify for this deduction. Irs form 1040 ez instructions Limit on deduction for dividends. Irs form 1040 ez instructions   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). Irs form 1040 ez instructions Figuring the limit. Irs form 1040 ez instructions   In figuring the limit, determine taxable income without the following items. Irs form 1040 ez instructions The net operating loss deduction. Irs form 1040 ez instructions The domestic production activities deduction. Irs form 1040 ez instructions The deduction for dividends received. Irs form 1040 ez instructions Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). Irs form 1040 ez instructions Any capital loss carryback to the tax year. Irs form 1040 ez instructions Effect of net operating loss. Irs form 1040 ez instructions   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. Irs form 1040 ez instructions To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. Irs form 1040 ez instructions Example 1. Irs form 1040 ez instructions A corporation loses $25,000 from operations. Irs form 1040 ez instructions It receives $100,000 in dividends from a 20%-owned corporation. Irs form 1040 ez instructions Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. Irs form 1040 ez instructions If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Irs form 1040 ez instructions Therefore, the 80% of taxable income limit does not apply. Irs form 1040 ez instructions The corporation can deduct the full $80,000. Irs form 1040 ez instructions Example 2. Irs form 1040 ez instructions Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Irs form 1040 ez instructions Its taxable income is $85,000 before the deduction for dividends received. Irs form 1040 ez instructions After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. Irs form 1040 ez instructions Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). Irs form 1040 ez instructions Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. Irs form 1040 ez instructions The nontaxed part is any dividends-received deduction allowable for the dividends. Irs form 1040 ez instructions Extraordinary dividend. Irs form 1040 ez instructions   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. Irs form 1040 ez instructions The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. Irs form 1040 ez instructions Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. Irs form 1040 ez instructions Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. Irs form 1040 ez instructions Disqualified preferred stock. Irs form 1040 ez instructions   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. Irs form 1040 ez instructions   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. Irs form 1040 ez instructions The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. Irs form 1040 ez instructions The issue price of the stock exceeds its liquidation rights or stated redemption price. Irs form 1040 ez instructions The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. Irs form 1040 ez instructions   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. Irs form 1040 ez instructions More information. Irs form 1040 ez instructions   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. Irs form 1040 ez instructions Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. Irs form 1040 ez instructions A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Irs form 1040 ez instructions A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. Irs form 1040 ez instructions Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. Irs form 1040 ez instructions Foregone interest. Irs form 1040 ez instructions   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Irs form 1040 ez instructions See Below-market loans, in chapter 4 of Publication 535 for more information. Irs form 1040 ez instructions Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. Irs form 1040 ez instructions The contribution is deductible if made to, or for the use of, a qualified organization. Irs form 1040 ez instructions For more information on qualified organizations, see Publication 526, Charitable Contributions. Irs form 1040 ez instructions Also see, Exempt Organizations Select Check (EO Select Check) at www. Irs form 1040 ez instructions irs. Irs form 1040 ez instructions gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. Irs form 1040 ez instructions Note. Irs form 1040 ez instructions You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. Irs form 1040 ez instructions Cash method corporation. Irs form 1040 ez instructions   A corporation using the cash method of accounting deducts contributions in the tax year paid. Irs form 1040 ez instructions Accrual method corporation. Irs form 1040 ez instructions   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Irs form 1040 ez instructions Make the choice by reporting the contribution on the corporation's return for the tax year. Irs form 1040 ez instructions A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. Irs form 1040 ez instructions The declaration must include the date the resolution was adopted. Irs form 1040 ez instructions Limitations on deduction. Irs form 1040 ez instructions   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Irs form 1040 ez instructions Figure taxable income for this purpose without the following. Irs form 1040 ez instructions The deduction for charitable contributions. Irs form 1040 ez instructions The dividends-received deduction. Irs form 1040 ez instructions The deduction allowed under section 249 of the Internal Revenue Code. Irs form 1040 ez instructions The domestic production activities deduction. Irs form 1040 ez instructions Any net operating loss carryback to the tax year. Irs form 1040 ez instructions Any capital loss carryback to the tax year. Irs form 1040 ez instructions Farmers and ranchers. Irs form 1040 ez instructions    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. Irs form 1040 ez instructions Carryover of excess contributions. Irs form 1040 ez instructions   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. Irs form 1040 ez instructions You lose any excess not used within that period. Irs form 1040 ez instructions For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. Irs form 1040 ez instructions Any excess not used in 2015 is lost. Irs form 1040 ez instructions Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). Irs form 1040 ez instructions You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. Irs form 1040 ez instructions Cash contributions. Irs form 1040 ez instructions   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. Irs form 1040 ez instructions The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. Irs form 1040 ez instructions Keep the record of the contribution with the other corporate records. Irs form 1040 ez instructions Do not attach the records to the corporation's return. Irs form 1040 ez instructions For more information on cash contributions, see Publication 526. Irs form 1040 ez instructions Gifts of $250 or more. Irs form 1040 ez instructions   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. Irs form 1040 ez instructions The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. Irs form 1040 ez instructions The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. Irs form 1040 ez instructions Keep the acknowledgement with other corporate records. Irs form 1040 ez instructions Do not attach the acknowledgement to the return. Irs form 1040 ez instructions Contributions of property other than cash. Irs form 1040 ez instructions   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. Irs form 1040 ez instructions In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. Irs form 1040 ez instructions   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. Irs form 1040 ez instructions For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. Irs form 1040 ez instructions   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. Irs form 1040 ez instructions A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. Irs form 1040 ez instructions The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. Irs form 1040 ez instructions   See Form 8283 for more information. Irs form 1040 ez instructions Qualified conservation contributions. Irs form 1040 ez instructions   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. Irs form 1040 ez instructions For more information, see section 170(h) of the Internal Revenue Code. Irs form 1040 ez instructions Contributions of used vehicles. Irs form 1040 ez instructions   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. Irs form 1040 ez instructions The deduction is limited, and other special rules apply. Irs form 1040 ez instructions For more information, see Publication 526. Irs form 1040 ez instructions Reduction for contributions of certain property. Irs form 1040 ez instructions   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. Irs form 1040 ez instructions   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. Irs form 1040 ez instructions Larger deduction. Irs form 1040 ez instructions   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. Irs form 1040 ez instructions This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. Irs form 1040 ez instructions Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. Irs form 1040 ez instructions The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. Irs form 1040 ez instructions Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. Irs form 1040 ez instructions Contributions to organizations conducting lobbying activities. Irs form 1040 ez instructions   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. Irs form 1040 ez instructions More information. Irs form 1040 ez instructions   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. Irs form 1040 ez instructions Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. Irs form 1040 ez instructions In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Irs form 1040 ez instructions Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. Irs form 1040 ez instructions A capital loss is carried to other years in the following order. Irs form 1040 ez instructions 3 years prior to the loss year. Irs form 1040 ez instructions 2 years prior to the loss year. Irs form 1040 ez instructions 1 year prior to the loss year. Irs form 1040 ez instructions Any loss remaining is carried forward for 5 years. Irs form 1040 ez instructions When you carry a net capital loss to another tax year, treat it as a short-term loss. Irs form 1040 ez instructions It does not retain its original identity as long term or short term. Irs form 1040 ez instructions Example. Irs form 1040 ez instructions A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. Irs form 1040 ez instructions The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. Irs form 1040 ez instructions The corporation treats this $6,000 as a short-term loss when carried back or forward. Irs form 1040 ez instructions The corporation carries the $6,000 short-term loss back 3 years. Irs form 1040 ez instructions In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. Irs form 1040 ez instructions It subtracts the $6,000 short-term loss first from the net short-term gain. Irs form 1040 ez instructions This results in a net capital gain for year 1 of $7,000. Irs form 1040 ez instructions This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. Irs form 1040 ez instructions S corporation status. Irs form 1040 ez instructions   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. Irs form 1040 ez instructions Rules for carryover and carryback. Irs form 1040 ez instructions   When carrying a capital loss from one year to another, the following rules apply. Irs form 1040 ez instructions When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. Irs form 1040 ez instructions In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. Irs form 1040 ez instructions If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. Irs form 1040 ez instructions You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. Irs form 1040 ez instructions Refunds. Irs form 1040 ez instructions   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. Irs form 1040 ez instructions If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. Irs form 1040 ez instructions S. Irs form 1040 ez instructions Corporation Income Tax Return, to apply for a refund. Irs form 1040 ez instructions Form 1139. Irs form 1040 ez instructions    A corporation can get a refund faster by using Form 1139. Irs form 1040 ez instructions It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. Irs form 1040 ez instructions Form 1120X. Irs form 1040 ez instructions   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. Irs form 1040 ez instructions The corporation must file the Form 1120X within 3 years of the due date, includin