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Irs Tax Extension

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Irs Tax Extension

Irs tax extension 6. Irs tax extension   Retail Tax on Heavy Trucks, Trailers, and Tractors Table of Contents Highway vehicle. Irs tax extension Vehicles not considered highway vehicles. Irs tax extension Idling reduction device. Irs tax extension Separate purchase. Irs tax extension Leases. Irs tax extension Exported vehicle. Irs tax extension Tax on resale of tax-paid trailers and semitrailers. Irs tax extension Use treated as sale. Irs tax extension Sale. Irs tax extension Long-term lease. Irs tax extension Short-term lease. Irs tax extension Related person. Irs tax extension Exclusions from tax base. Irs tax extension Sales not at arm's length. Irs tax extension Installment sales. Irs tax extension Repairs and modifications. Irs tax extension Further manufacture. Irs tax extension Rail trailers and rail vans. Irs tax extension Parts and accessories. Irs tax extension Trash containers. Irs tax extension House trailers. Irs tax extension Camper coaches or bodies for self-propelled mobile homes. Irs tax extension Farm feed, seed, and fertilizer equipment. Irs tax extension Ambulances and hearses. Irs tax extension Truck-tractors. Irs tax extension Concrete mixers. Irs tax extension Registration requirement. Irs tax extension Further manufacture. Irs tax extension 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 tax extension Truck chassis and bodies. Irs tax extension Truck trailer and semitrailer chassis and bodies. Irs tax extension Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Irs tax extension 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 tax extension A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. Irs tax extension A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. Irs tax extension A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. Irs tax extension The seller is liable for the tax. Irs tax extension Chassis or body. Irs tax extension   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 tax extension Highway vehicle. Irs tax extension   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 tax extension Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. Irs tax extension 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 tax extension A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). Irs tax extension A special kind of cargo, goods, supplies, or materials. Irs tax extension Some off-highway task unrelated to highway transportation, except as discussed next. Irs tax extension Vehicles not considered highway vehicles. Irs tax extension   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax. Irs tax extension Specially designed mobile machinery for nontransportation functions. Irs tax extension A self-propelled vehicle is not a highway vehicle if all the following apply. Irs tax extension 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 tax extension 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 tax extension 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 tax extension Vehicles specially designed for off-highway transportation. Irs tax extension 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 tax extension 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 tax extension It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. Irs tax extension Nontransportation trailers and semitrailers. Irs tax extension 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 tax extension 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 tax extension Gross vehicle weight. Irs tax extension   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 tax extension 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 tax extension 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 tax extension   The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax. Irs tax extension Platform truck bodies 21 feet or less in length. Irs tax extension Dry freight and refrigerated truck van bodies 24 feet or less in length. Irs tax extension Dump truck bodies with load capacities of 8 cubic yards or less. Irs tax extension Refuse packer truck bodies with load capacities of 20 cubic yards or less. Irs tax extension For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I. Irs tax extension R. Irs tax extension B. Irs tax extension 2005-14 at www. Irs tax extension irs. Irs tax extension gov/pub/irs-irbs/irb05-14. Irs tax extension pdf. Irs tax extension   The gross vehicle weight means the maximum total weight of a loaded vehicle. Irs tax extension 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 tax extension 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 tax extension The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. Irs tax extension See Regulations section 145. Irs tax extension 4051-1(e)(3) for more information. Irs tax extension Parts or accessories. Irs tax extension   The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. Irs tax extension 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 tax extension The tax applies in this case whether or not the retailer bills the parts or accessories separately. Irs tax extension   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 tax extension The tax applies unless there is evidence to the contrary. Irs tax extension 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 tax extension The tax does not apply to parts and accessories that are spares or replacements. Irs tax extension   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 tax extension Idling reduction device. Irs tax extension   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 tax extension 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 tax extension The EPA discusses idling reduction technologies on its website at www. Irs tax extension epa. Irs tax extension gov/smartway/technology/idling. Irs tax extension htm. Irs tax extension Separate purchase. Irs tax extension   The tax generally applies to the price of a part or accessory and its installation if the following conditions are met. Irs tax extension The owner, lessee, or operator of any vehicle that contains a taxable article installs any part or accessory on the vehicle. Irs tax extension The installation occurs within 6 months after the vehicle is first placed in service. Irs tax extension   The owners of the trade or business installing the parts or accessories are secondarily liable for the tax. Irs tax extension   A vehicle is placed in service on the date the owner takes actual possession of the vehicle. Irs tax extension This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner. Irs tax extension   The tax does not apply if the installed part or accessory is a replacement part or accessory. Irs tax extension 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 tax extension 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 tax extension Example. Irs tax extension You bought a taxable vehicle and placed it in service on April 8. Irs tax extension On May 3, you bought and installed parts and accessories at a cost of $850. Irs tax extension On July 15, you bought and installed parts and accessories for $300. Irs tax extension Tax of $138 (12% of $1,150) applies on July 15. Irs tax extension Also, tax will apply to any costs of additional parts and accessories installed on the vehicle before October 8. Irs tax extension First retail sale defined. Irs tax extension   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 tax extension 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 tax extension The sale qualifies as a tax-free sale under section 4221 (see Sales exempt from tax, later). Irs tax extension 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 tax extension There is no registration requirement. Irs tax extension Leases. Irs tax extension   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 tax extension The tax is imposed on the lessor at the time of the lease. Irs tax extension   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 tax extension The tax is imposed on the lessor at the time of the lease. Irs tax extension Exported vehicle. Irs tax extension   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 tax extension Tax on resale of tax-paid trailers and semitrailers. Irs tax extension   The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. Irs tax extension The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. Irs tax extension The credit cannot exceed the tax on the resale. Irs tax extension See Regulations section 145. Irs tax extension 4052-1(a)(4) for information on the conditions to allowance for the credit. Irs tax extension Use treated as sale. Irs tax extension   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 tax extension Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. Irs tax extension The tax attaches when the use begins. Irs tax extension   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 tax extension   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 tax extension   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 tax extension Presumptive retail sales price. Irs tax extension   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 tax extension 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 tax extension Table 6-1 outlines the appropriate tax base calculation for various transactions. Irs tax extension   The presumed markup percentage to be used for trucks and truck-tractors is 4%. Irs tax extension But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero. Irs tax extension Sale. Irs tax extension   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 tax extension Long-term lease. Irs tax extension   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 tax extension Short-term lease. Irs tax extension   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 tax extension   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 tax extension   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 tax extension Related person. Irs tax extension   A related person is any member of the same controlled group as the manufacturer, producer, or importer. Irs tax extension 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 tax extension Table 6-1. Irs tax extension Tax Base IF the transaction is a. Irs tax extension . Irs tax extension . Irs tax extension THEN figuring the base by using the. Irs tax extension . Irs tax extension . Irs tax extension 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 tax extension   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 tax extension   When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. Irs tax extension However, you do add a markup if all the following apply. Irs tax extension You do not perform any significant activities relating to the processing of the sale of a taxable article. Irs tax extension The main reason for processing the sale through you is to avoid or evade the presumed markup. Irs tax extension 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 tax extension In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price. Irs tax extension Determination of tax base. Irs tax extension   These rules apply to both normal retail sales price and presumptive retail sales price computations. Irs tax extension 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 tax extension However, see Presumptive retail sales price, earlier. Irs tax extension Exclusions from tax base. Irs tax extension   Exclude from the tax base the retail excise tax imposed on the sale. Irs tax extension 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 tax extension Also exclude the value of any used component of the article furnished by the first user of the article. Irs tax extension   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 tax extension These expenses are those incurred in delivery from the retail dealer to the customer. Irs tax extension 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 tax extension   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 tax extension 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 tax extension Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe. Irs tax extension Sales not at arm's length. Irs tax extension   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 tax extension   A sale is not at arm's length if either of the following apply. Irs tax extension 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 tax extension The sale is made under special arrangements between a seller and a purchaser. Irs tax extension Installment sales. Irs tax extension   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 tax extension The tax is figured on the entire sales price. Irs tax extension No part of the tax is deferred because the sales price is paid in installments. Irs tax extension Repairs and modifications. Irs tax extension   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 tax extension This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. Irs tax extension However, this exception generally does not apply to an article that was not subject to the tax when it was new. Irs tax extension Further manufacture. Irs tax extension   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 tax extension 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 tax extension Combining an article with an item in this list does not give rise to taxability. Irs tax extension However, see Parts or accessories discussed earlier. Irs tax extension Articles exempt from tax. Irs tax extension   The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions. Irs tax extension Rail trailers and rail vans. Irs tax extension   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 tax extension Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car. Irs tax extension Parts and accessories. Irs tax extension   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 tax extension Trash containers. Irs tax extension   This is any box, container, receptacle, bin, or similar article that meets all the following conditions. Irs tax extension It is designed to be used as a trash container. Irs tax extension It is not designed to carry freight other than trash. Irs tax extension It is not designed to be permanently mounted on or affixed to a truck chassis or body. Irs tax extension House trailers. Irs tax extension   This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks. Irs tax extension Camper coaches or bodies for self-propelled mobile homes. Irs tax extension   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 tax extension Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies. Irs tax extension Farm feed, seed, and fertilizer equipment. Irs tax extension   This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. Irs tax extension 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 tax extension Ambulances and hearses. Irs tax extension   This is any ambulance, hearse, or combination ambulance-hearse. Irs tax extension Truck-tractors. Irs tax extension   This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals. Irs tax extension Concrete mixers. Irs tax extension   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 tax extension This exemption does not apply to the chassis on which the article is mounted. Irs tax extension Sales exempt from tax. Irs tax extension   The following sales are ordinarily exempt from tax. Irs tax extension Sales to a state or local government for its exclusive use. Irs tax extension Sales to Indian tribal governments, but only if the transaction involves the exercise of an essential tribal government function. Irs tax extension Sales to a nonprofit educational organization for its exclusive use. Irs tax extension 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 tax extension Sales for use by the purchaser for further manufacture of other taxable articles (see below). Irs tax extension Sales for export or for resale by the purchaser to a second purchaser for export. Irs tax extension Sales to the United Nations for official use. Irs tax extension Registration requirement. Irs tax extension   In general, the seller and buyer must be registered for a sale to be tax free. Irs tax extension See the Form 637 instructions for more information. Irs tax extension 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 tax extension Further manufacture. Irs tax extension   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 tax extension Credits or refunds. Irs tax extension   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 tax extension The person using the article as a component part is eligible for the credit or refund. Irs tax extension   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 tax extension 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 tax extension   See also Conditions to allowance in chapter 5. Irs tax extension Tire credit. Irs tax extension   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 tax extension The credit is equal to the manufacturers excise tax imposed on the taxable tires (discussed earlier). Irs tax extension 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 tax extension Prev  Up  Next   Home   More Online Publications
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The Irs Tax Extension

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