Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Military Tax Preparation

2007 Tax FormFile Late Tax ReturnFederal And State Tax FormsBack Tax ReturnsRee 1040 Ez Tax Filing OnlineForm 1040x 2012 Irs2011 Taxact Deluxe Unlock CodeAmend My TaxesIrs Forms 1040 2011Irs Forms 2012 TaxesFile 2012 Taxes Late OnlineFile Past TaxesIrs Amended Tax FormH And R TaxIrs Extention FormsFiling Tax AmendmentIrs Tax Extension FormState Income Tax Rate ComparisonsHr Block Tax Free File Online FederalH&r Block FreeAmend A Tax ReturnCan I Still E File My 2012 TaxesInternal Revenue Service Form 1040ezFree State Tax PreparationFiling Income Tax ReturnH&r Block 1040ezDownload Irs Form 1040 2010How Do College Students File TaxesFree 1040 Income Tax FormEfile State Income Tax1040x Form 2012Cheap State Taxes OnlineFile 1040xAmended Utah State Tax ReturnFree Online Ez FormWww Irs Gov Formspubs2014 1040ez1040 For 2010State Tax PreparationFree 2010 Turbotax

Military Tax Preparation

Military tax preparation Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Military tax preparation Computer used in a home office. Military tax preparation Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Military tax preparation You can claim the amount of expenses that is more than 2% of your adjusted gross income. Military tax preparation You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Military tax preparation Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Military tax preparation Generally, you apply the 2% limit after you apply any other deduction limit. Military tax preparation For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Military tax preparation Deductions subject to the 2% limit are discussed in the following three categories. Military tax preparation Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Military tax preparation Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Military tax preparation Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Military tax preparation Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Military tax preparation You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Military tax preparation An expense is ordinary if it is common and accepted in your trade, business, or profession. Military tax preparation An expense is necessary if it is appropriate and helpful to your business. Military tax preparation An expense does not have to be required to be considered necessary. Military tax preparation You may be able to deduct the following items as unreimbursed employee expenses. Military tax preparation Business bad debt of an employee. Military tax preparation Business liability insurance premiums. Military tax preparation Damages paid to a former employer for breach of an employment contract. Military tax preparation Depreciation on a computer your employer requires you to use in your work. Military tax preparation Dues to a chamber of commerce if membership helps you do your job. Military tax preparation Dues to professional societies. Military tax preparation Educator expenses. Military tax preparation Home office or part of your home used regularly and exclusively in your work. Military tax preparation Job search expenses in your present occupation. Military tax preparation Laboratory breakage fees. Military tax preparation Legal fees related to your job. Military tax preparation Licenses and regulatory fees. Military tax preparation Malpractice insurance premiums. Military tax preparation Medical examinations required by an employer. Military tax preparation Occupational taxes. Military tax preparation Passport for a business trip. Military tax preparation Repayment of an income aid payment received under an employer's plan. Military tax preparation Research expenses of a college professor. Military tax preparation Rural mail carriers' vehicle expenses. Military tax preparation Subscriptions to professional journals and trade magazines related to your work. Military tax preparation Tools and supplies used in your work. Military tax preparation Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Military tax preparation Union dues and expenses. Military tax preparation Work clothes and uniforms if required and not suitable for everyday use. Military tax preparation Work-related education. Military tax preparation Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Military tax preparation Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Military tax preparation A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Military tax preparation Example. Military tax preparation You make a bona fide loan to the corporation you work for. Military tax preparation It fails to pay you back. Military tax preparation You had to make the loan in order to keep your job. Military tax preparation You have a business bad debt as an employee. Military tax preparation More information. Military tax preparation   For more information on business bad debts, see chapter 10 in Publication 535. Military tax preparation For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Military tax preparation Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Military tax preparation Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Military tax preparation Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Military tax preparation For the convenience of your employer. Military tax preparation   This means that your use of the computer is for a substantial business reason of your employer. Military tax preparation You must consider all facts in making this determination. Military tax preparation Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Military tax preparation Required as a condition of your employment. Military tax preparation   This means that you cannot properly perform your duties without the computer. Military tax preparation Whether you can properly perform your duties without it depends on all the facts and circumstances. Military tax preparation It is not necessary that your employer explicitly requires you to use your computer. Military tax preparation But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Military tax preparation Example. Military tax preparation You are an engineer with an engineering firm. Military tax preparation You occasionally take work home at night rather than work late at the office. Military tax preparation You own and use a computer that is similar to the one you use at the office to complete your work at home. Military tax preparation Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Military tax preparation Which depreciation method to use. Military tax preparation   The depreciation method you use depends on whether you meet the more-than-50%-use test. Military tax preparation More-than-50%-use test met. Military tax preparation   You meet this test if you use the computer more than 50% in your work. Military tax preparation If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Military tax preparation In addition, you may be able to take the section 179 deduction for the year you place the item in service. Military tax preparation More-than-50%-use test not met. Military tax preparation   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Military tax preparation You also cannot claim the section 179 deduction. Military tax preparation (But if you use your computer in a home office, see the exception below. Military tax preparation ) Investment use. Military tax preparation   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Military tax preparation However, you can combine your investment use with your work use in figuring your depreciation deduction. Military tax preparation Exception for computer used in a home office. Military tax preparation   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Military tax preparation You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Military tax preparation You also may be able to take a section 179 deduction for the year you place the computer in service. Military tax preparation See Computer used in a home office under How To Report, later. Military tax preparation More information. Military tax preparation   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Military tax preparation Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Military tax preparation Reporting your depreciation deduction. Military tax preparation    See How To Report, later, for information about reporting a deduction for depreciation. Military tax preparation You must keep records to prove your percentage of business and investment use. Military tax preparation Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Military tax preparation Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Military tax preparation Lobbying and political activities. Military tax preparation    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Military tax preparation See Lobbying Expenses under Nondeductible Expenses, later. Military tax preparation Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Military tax preparation If you file Form 1040A, you can deduct these expenses on line 16. Military tax preparation If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Military tax preparation However, neither spouse can deduct more than $250 of his or her qualified expenses. Military tax preparation Eligible educator. Military tax preparation   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Military tax preparation Qualified expenses. Military tax preparation   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Military tax preparation An ordinary expense is one that is common and accepted in your educational field. Military tax preparation A necessary expense is one that is helpful and appropriate for your profession as an educator. Military tax preparation An expense does not have to be required to be considered necessary. Military tax preparation   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Military tax preparation You must reduce your qualified expenses by the following amounts. Military tax preparation Excludable U. Military tax preparation S. Military tax preparation series EE and I savings bond interest from Form 8815. Military tax preparation Nontaxable qualified state tuition program earnings. Military tax preparation Nontaxable earnings from Coverdell education savings accounts. Military tax preparation Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Military tax preparation Educator expenses over limit. Military tax preparation   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Military tax preparation Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Military tax preparation You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Military tax preparation The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Military tax preparation Principal place of business. Military tax preparation   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Military tax preparation   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Military tax preparation You should keep records that will give the information needed to figure the deduction according to these rules. Military tax preparation Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Military tax preparation More information. Military tax preparation   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Military tax preparation Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Military tax preparation You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Military tax preparation Employment and outplacement agency fees. Military tax preparation    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Military tax preparation Employer pays you back. Military tax preparation   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Military tax preparation See Recoveries in Publication 525. Military tax preparation Employer pays the employment agency. Military tax preparation   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Military tax preparation Résumé. Military tax preparation   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Military tax preparation Travel and transportation expenses. Military tax preparation   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Military tax preparation You can deduct the travel expenses if the trip is primarily to look for a new job. Military tax preparation The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Military tax preparation   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Military tax preparation    You can choose to use the standard mileage rate to figure your car expenses. Military tax preparation The 2013 rate for business use of a vehicle is 56½ cents per mile. Military tax preparation See Publication 463 for more information on travel and car expenses. Military tax preparation Legal Fees You can deduct legal fees related to doing or keeping your job. Military tax preparation Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Military tax preparation Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Military tax preparation If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Military tax preparation Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Military tax preparation If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Military tax preparation Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Military tax preparation You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Military tax preparation However, you cannot deduct the cost of travel as a form of education. Military tax preparation Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Military tax preparation See chapter 4 of Publication 463 for more information. Military tax preparation Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Military tax preparation You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Military tax preparation For more information about depreciation, see Publication 946. Military tax preparation Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Military tax preparation Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Military tax preparation Travel expenses. Military tax preparation   Travel expenses are those incurred while traveling away from home for your employer. Military tax preparation You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Military tax preparation Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Military tax preparation   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Military tax preparation ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Military tax preparation   Travel expenses are discussed more fully in chapter 1 of Publication 463. Military tax preparation Temporary work assignment. Military tax preparation    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Military tax preparation Indefinite work assignment. Military tax preparation   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Military tax preparation If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Military tax preparation Federal crime investigation and prosecution. Military tax preparation   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Military tax preparation This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Military tax preparation   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Military tax preparation Armed Forces reservists traveling more than 100 miles from home. Military tax preparation   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Military tax preparation The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Military tax preparation The balance, if any, is reported on Schedule A. Military tax preparation   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Military tax preparation   For more information on travel expenses, see Publication 463. Military tax preparation Local transportation expenses. Military tax preparation   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Military tax preparation They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Military tax preparation   You can choose to use the standard mileage rate to figure your car expenses. Military tax preparation The 2013 rate for business use of a vehicle is 56½ cents per mile. Military tax preparation    In general, the costs of commuting between your residence and your place of business are nondeductible. Military tax preparation Work at two places in a day. Military tax preparation   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Military tax preparation Temporary work location. Military tax preparation   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Military tax preparation The work location is outside the metropolitan area where you live and normally work. Military tax preparation You have at least one regular work location (other than your home) for the same trade or business. Military tax preparation (If this applies, the distance between your home and the temporary work location does not matter. Military tax preparation )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Military tax preparation It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Military tax preparation If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Military tax preparation For more information, see chapter 1 of Publication 463. Military tax preparation Home office. Military tax preparation   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Military tax preparation (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Military tax preparation ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Military tax preparation Meals and entertainment. Military tax preparation   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Military tax preparation However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Military tax preparation   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Military tax preparation You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Military tax preparation Meals when subject to “hours of service” limits. Military tax preparation   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Military tax preparation You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Military tax preparation Gift expenses. Military tax preparation   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Military tax preparation The following items do not count toward the $25 limit. Military tax preparation Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Military tax preparation Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Military tax preparation Local lodging. Military tax preparation   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Military tax preparation   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Military tax preparation Additional information. Military tax preparation    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Military tax preparation Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Military tax preparation You can also deduct assessments for benefit payments to unemployed union members. Military tax preparation However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Military tax preparation Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Military tax preparation You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Military tax preparation See Lobbying Expenses under Nondeductible Expenses, later. Military tax preparation Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Military tax preparation You must wear them as a condition of your employment. Military tax preparation The clothes are not suitable for everyday wear. Military tax preparation It is not enough that you wear distinctive clothing. Military tax preparation The clothing must be specifically required by your employer. Military tax preparation Nor is it enough that you do not, in fact, wear your work clothes away from work. Military tax preparation The clothing must not be suitable for taking the place of your regular clothing. Military tax preparation Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Military tax preparation ). Military tax preparation Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Military tax preparation However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Military tax preparation Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Military tax preparation Protective clothing. Military tax preparation   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Military tax preparation   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Military tax preparation Military uniforms. Military tax preparation   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Military tax preparation However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Military tax preparation In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Military tax preparation   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Military tax preparation   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Military tax preparation However, you can deduct the cost of insignia, shoulder boards, and related items. Military tax preparation    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Military tax preparation Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Military tax preparation It maintains or improves skills required in your present work. Military tax preparation It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Military tax preparation You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Military tax preparation If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Military tax preparation If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Military tax preparation Travel as education. Military tax preparation   You cannot deduct the cost of travel that in itself constitutes a form of education. Military tax preparation For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Military tax preparation More information. Military tax preparation    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Military tax preparation Education Expenses During Unemployment If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Military tax preparation Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Military tax preparation Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Military tax preparation Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Military tax preparation These fees include the cost of tax preparation software programs and tax publications. Military tax preparation They also include any fee you paid for electronic filing of your return. Military tax preparation See Tax preparation fees under How To Report, later. Military tax preparation Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Military tax preparation On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Military tax preparation You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Military tax preparation These other expenses include the following items. Military tax preparation Appraisal fees for a casualty loss or charitable contribution. Military tax preparation Casualty and theft losses from property used in performing services as an employee. Military tax preparation Clerical help and office rent in caring for investments. Military tax preparation Depreciation on home computers used for investments. Military tax preparation Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Military tax preparation Fees to collect interest and dividends. Military tax preparation Hobby expenses, but generally not more than hobby income. Military tax preparation Indirect miscellaneous deductions from pass-through entities. Military tax preparation Investment fees and expenses. Military tax preparation Legal fees related to producing or collecting taxable income or getting tax advice. Military tax preparation Loss on deposits in an insolvent or bankrupt financial institution. Military tax preparation Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Military tax preparation Repayments of income. Military tax preparation Repayments of social security benefits. Military tax preparation Safe deposit box rental, except for storing jewelry and other personal effects. Military tax preparation Service charges on dividend reinvestment plans. Military tax preparation Tax advice fees. Military tax preparation Trustee's fees for your IRA, if separately billed and paid. Military tax preparation If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Military tax preparation Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Military tax preparation Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Military tax preparation First report the loss in Section B of Form 4684, Casualties and Thefts. Military tax preparation You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Military tax preparation To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Military tax preparation For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Military tax preparation Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Military tax preparation Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Military tax preparation The fees are deductible on the return for the year in which you paid them. Military tax preparation For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Military tax preparation Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Military tax preparation You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Military tax preparation But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Military tax preparation For more information on depreciation, see Publication 946. Military tax preparation Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Military tax preparation Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Military tax preparation The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Military tax preparation For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Military tax preparation Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Military tax preparation But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Military tax preparation You must add the fee to the cost of the property. Military tax preparation You cannot deduct the fee you pay to a broker to sell securities. Military tax preparation You can use the fee only to figure gain or loss from the sale. Military tax preparation See the instructions for Schedule D (Form 1040) for information on how to report the fee. Military tax preparation Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Military tax preparation A hobby is not a business because it is not carried on to make a profit. Military tax preparation See Not-for-Profit Activities in chapter 1 of Publication 535. Military tax preparation Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Military tax preparation Deductions of pass-through entities are passed through to the partners or shareholders. Military tax preparation The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Military tax preparation Example. Military tax preparation You are a member of an investment club that is formed solely to invest in securities. Military tax preparation The club is treated as a partnership. Military tax preparation The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Military tax preparation In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Military tax preparation However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Military tax preparation Publicly offered mutual funds. Military tax preparation   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Military tax preparation A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Military tax preparation   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Military tax preparation This net figure is the amount you report on your return as income. Military tax preparation You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Military tax preparation Information returns. Military tax preparation   You should receive information returns from pass-through entities. Military tax preparation Partnerships and S corporations. Military tax preparation   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Military tax preparation Nonpublicly offered mutual funds. Military tax preparation   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Military tax preparation You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Military tax preparation Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Military tax preparation Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Military tax preparation You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Military tax preparation You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Military tax preparation You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Military tax preparation See Tax Preparation Fees, earlier. Military tax preparation Unlawful discrimination claims. Military tax preparation   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Military tax preparation S. Military tax preparation Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Military tax preparation However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Military tax preparation See Publication 525 for more information. Military tax preparation Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Military tax preparation If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Military tax preparation If elected, the casualty loss is subject to certain deduction limitations. Military tax preparation The election is made on Form 4684. Military tax preparation Once you make this choice, you cannot change it without IRS approval. Military tax preparation If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Military tax preparation As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Military tax preparation Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Military tax preparation This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Military tax preparation As a casualty loss. Military tax preparation Report it on Form 4684 first and then on Schedule A (Form 1040). Military tax preparation See Publication 547 for details. Military tax preparation As a nonbusiness bad debt. Military tax preparation Report it on Schedule D (Form 1040). Military tax preparation If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Military tax preparation Exception. Military tax preparation   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Military tax preparation For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Military tax preparation Actual loss different from estimated loss. Military tax preparation   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Military tax preparation See Recoveries in Publication 525. Military tax preparation If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Military tax preparation Choice not made. Military tax preparation   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Military tax preparation See Nonbusiness Bad Debts in chapter 4 of Publication 550. Military tax preparation Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Military tax preparation For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Military tax preparation Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Military tax preparation If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Military tax preparation If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Military tax preparation Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Military tax preparation The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Military tax preparation The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Military tax preparation It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Military tax preparation If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Military tax preparation See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Military tax preparation Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Military tax preparation You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Military tax preparation Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Military tax preparation These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Military tax preparation Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Military tax preparation Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Military tax preparation They are not subject to the 2% limit. Military tax preparation Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Military tax preparation List of Deductions Amortizable premium on taxable bonds. Military tax preparation Casualty and theft losses from income-producing property. Military tax preparation Federal estate tax on income in respect of a decedent. Military tax preparation Gambling losses up to the amount of gambling winnings. Military tax preparation Impairment-related work expenses of persons with disabilities. Military tax preparation Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Military tax preparation Losses from Ponzi-type investment schemes. Military tax preparation Repayments of more than $3,000 under a claim of right. Military tax preparation Unrecovered investment in an annuity. Military tax preparation Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Military tax preparation You can elect to amortize the premium on taxable bonds. Military tax preparation The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Military tax preparation Pre-1998 election to amortize bond premium. Military tax preparation   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Military tax preparation Bonds acquired after October 22, 1986, and before 1988. Military tax preparation   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Military tax preparation Bonds acquired before October 23, 1986. Military tax preparation   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Military tax preparation Deduction for excess premium. Military tax preparation   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Military tax preparation If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Military tax preparation However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Military tax preparation If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Military tax preparation    Pre-1998 choice to amortize bond premium. Military tax preparation If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Military tax preparation More information. Military tax preparation    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Military tax preparation Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Military tax preparation First report the loss in Section B of Form 4684. Military tax preparation You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Military tax preparation To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Military tax preparation For more information on casualty and theft losses, see Publication 547. Military tax preparation Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Military tax preparation Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Military tax preparation See Publication 559 for information about figuring the amount of this deduction. Military tax preparation Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Military tax preparation You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Military tax preparation You cannot deduct gambling losses that are more than your winnings. Military tax preparation Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Military tax preparation You cannot reduce your gambling winnings by your gambling losses and report the difference. Military tax preparation You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Military tax preparation Therefore, your records should show your winnings separately from your losses. Military tax preparation Diary of winnings and losses. Military tax preparation You must keep an accurate diary or similar record of your losses and winnings. Military tax preparation Your diary should contain at least the following information. Military tax preparation The date and type of your specific wager or wagering activity. Military tax preparation The name and address or location of the gambling establishment. Military tax preparation The names of other persons present with you at the gambling establishment. Military tax preparation The amount(s) you won or lost. Military tax preparation Proof of winnings and losses. Military tax preparation   In addition to your diary, you should also have other documentation. Military tax preparation You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Military tax preparation   For specific wagering transactions, you can use the following items to support your winnings and losses. Military tax preparation    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Military tax preparation They are not all-inclusive. Military tax preparation Your tax liability depends on your particular facts and circumstances. Military tax preparation Keno. Military tax preparation   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Military tax preparation Slot machines. Military tax preparation   A record of the machine number and all winnings by date and time the machine was played. Military tax preparation Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Military tax preparation ). Military tax preparation   The number of the table at which you were playing. Military tax preparation Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Military tax preparation Bingo. Military tax preparation   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Military tax preparation Supplemental records include any receipts from the casino, parlor, etc. Military tax preparation Racing (horse, harness, dog, etc. Military tax preparation ). Military tax preparation   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Military tax preparation Supplemental records include unredeemed tickets and payment records from the racetrack. Military tax preparation Lotteries. Military tax preparation   A record of ticket purchases, dates, winnings, and losses. Military tax preparation Supplemental records include unredeemed tickets, payment slips, and winnings statements. Military tax preparation Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Military tax preparation Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Military tax preparation Example. Military tax preparation You are blind. Military tax preparation You must use a reader to do your work. Military tax preparation You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Military tax preparation The reader's services are only for your work. Military tax preparation You can deduct your expenses for the reader as impairment-related work expenses. Military tax preparation Self-employed. Military tax preparation   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Military tax preparation See Impairment-related work expenses. Military tax preparation , later under How To Report. Military tax preparation Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Military tax preparation S. Military tax preparation trade or business). Military tax preparation It is not subject to the passive activity limitations. Military tax preparation Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Military tax preparation See Publication 463 for more information. Military tax preparation Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Military tax preparation If you are an employee, complete Form 2106 or Form 2106-EZ. Military tax preparation See Publication 463 for more information. Military tax preparation Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Military tax preparation You figure the deductible loss in Section B of Form 4684. Military tax preparation However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Military tax preparation Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Military tax preparation You do not need to complete Appendix A. Military tax preparation See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Military tax preparation Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Military tax preparation See Repayments in Publication 525 for more information. Military tax preparation Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Military tax preparation If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Military tax preparation See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Military tax preparation Nondeductible Expenses You cannot deduct the following expenses. Military tax preparation List of Nondeductible Expenses Adoption expenses. Military tax preparation Broker's commissions. Military tax preparation Burial or funeral expenses, including the cost of a cemetery lot. Military tax preparation Campaign expenses. Military tax preparation Capital expenses. Military tax preparation Check-writing fees. Military tax preparation Club dues. Military tax preparation Commuting expenses. Military tax preparation Fees and licenses, such as car licenses, marriage licenses, and dog tags. Military tax preparation Fines and penalties, such as parking tickets. Military tax preparation Health spa expenses. Military tax preparation Hobby losses—but see Hobby Expenses, earlier. Military tax preparation Home repairs, insurance, and rent. Military tax preparation Home security system. Military tax preparation Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Military tax preparation Investment-related seminars. Military tax preparation Life insurance premiums paid by the insured. Military tax preparation Lobbying expenses. Military tax preparation Losses from the sale of your home, furniture, personal car, etc. Military tax preparation Lost or misplaced cash or property. Military tax preparation Lunches with co-workers. Military tax preparation Meals while working late. Military tax preparation Medical expenses as business expenses other than medical examinations required by your employer. Military tax preparation Personal disability insurance premiums. Military tax preparation Personal legal expenses. Military tax preparation Personal, living, or family expenses. Military tax preparation Political contributions. Military tax preparation Professional accreditation fees. Military tax preparation Professional reputation, expenses to improve. Military tax preparation Relief fund contributions. Military tax preparation Residential telephone line. Military tax preparation Stockholders' meeting, expenses of attending. Military tax preparation Tax-exempt income, expenses of earning or collecting. Military tax preparation The value of wages never received or lost vacation time. Military tax preparation Travel expenses for another individual. Military tax preparation Voluntary unemployment benefit fund contributions. Military tax preparation Wristwatches. Military tax preparation Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Military tax preparation For details, see Form 8839, Qualified Adoption Expenses. Military tax preparation Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Military tax preparation Instead, these fees must be added to the taxpayer's cost of the securities. Military tax preparation Commissions paid on the sale are deductible as business expenses only by dealers. Military tax preparation Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Military tax preparation These include qualification and registration fees for primary elections. Military tax preparation Legal fees. Military tax preparation   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Military tax preparation Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Military tax preparation If you use such property in your work, you may be able to take a depreciation deduction. Military tax preparation See Publication 946. Military tax preparation If the property is a car used in your work, also see Publication 463. Military tax preparation Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Military tax preparation Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Military tax preparation This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Military tax preparation You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Military tax preparation Dues paid to airline, hotel, and luncheon clubs are not deductible. Military tax preparation Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Military tax preparation If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Military tax preparation Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Military tax preparation This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Military tax preparation Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Military tax preparation Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Military tax preparation Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Military tax preparation However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Military tax preparation See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Military tax preparation Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Military tax preparation Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Military tax preparation You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Military tax preparation See Publication 504, Divorced or Separated Individuals, for information on alimony. Military tax preparation Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Military tax preparation These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Military tax preparation Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Military tax preparation Covered executive branch official. Military tax preparation   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Military tax preparation The President. Military tax preparation The Vice President. Military tax preparation Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office. Military tax preparation Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Military tax preparation Dues used for lobbying. Military tax preparation   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Military tax preparation Exceptions. Military tax preparation   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Military tax preparation You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Military tax preparation An Indian tribal government is considered a local council or similar governing body. Military tax preparation You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Military tax preparation If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Military tax preparation Payments by the other person to you for lobbying activities cannot be deducted. Military tax preparation Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Military tax preparation However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Military tax preparation See Publication 547. Military tax preparation Example. Military tax preparation A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Military tax preparation The diamond falls from the ring and is never found. Military tax preparation The loss of the diamond is a casualty. Military tax preparation Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Military tax preparation See Publication 463 for information on deductible expenses while traveling away from home. Military tax preparation Meals While Working Late You cannot deduct the cost of meals while working late. Military tax preparation However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Military tax preparation See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Military tax preparation Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Military tax preparation Custody of children. Military tax preparation Breach of promise to marry suit. Military tax preparation Civil or criminal charges resulting from a personal relationship. Military tax preparation Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Military tax preparation For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Military tax preparation Preparation of a title (or defense or perfection of a title). Military tax preparation Preparation of a will. Military tax preparation Property claims or property settlement in a divorce. Military tax preparation You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Military tax preparation Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Military tax preparation Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Military tax preparation Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Military tax preparation Accounting certificate fees paid for the initial right to practice accounting. Military tax preparation Bar exam fees and incidental expenses in securing initial admission to the bar. Military tax preparation Medical and dental license fees paid to get initial licensing. Military tax preparation Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Military tax preparation Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Military tax preparation Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Military tax preparation Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Military tax preparation You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Military tax preparation Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Military tax preparation You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Military tax preparation If you have expenses to p
Print - Click this link to Print this page

Phone Forums - Retirement Plans

Free phone forums featuring IRS employees discussing retirement plan topics.

Upcoming Phone Forums

Check back for upcoming phone forums.


Continuing Education (CE) Credits

  • Enrolled Agents and Enrolled Retirement Plan Agents may earn CE credit for attending the entire phone forum. The forum is also intended to meet the CE requirements for Enrolled Actuaries, but the final decision rests with the Joint Board for the Enrollment of Actuaries. Other professional groups should consult with their licensing agencies regarding CE credit.
  • Participants must register individually and use their own assigned User ID to receive CE credit.
  • Each participant must use an individual phone line to establish attendance and the length of time attending the forum.
  • A Certificate of Completion will be emailed to the participants who meet the attendance requirement about a week after the forum.
  • Interested in other opportunities to earn free CE credits?

If you have question(s), please contact us at ep.phoneforum@irs.gov.



Recently Held Phone Forums

An Overview of the 2013 Cumulative List of Changes in Plan Qualification- March 13, 2014 - Discussed the list of changes plan sponsors and practitioners must make to a plan before submitting determination letter applications beginning February 1, 2014 (Notice 2013-84). 
Handouts: An Overview of the 2013 Cumulative List of Changes in Plan Qualification presentation and Notice 2013-84

Upcoming Employee Plans Guidance Phone Forum - February 26, 2014 (scheduled previously for October 29, 2013) - Reviewed retirement benefit items on the 2013-2014 Priority Guidance Plan released on August 9 and other projects in EP Technical Guidance.
Handout: Employee Plans Technical Guidance

Ethical Standards of Employee Benefits Practice – What to Ask and Say to Clients, and What to Tell the IRS - January 29, 2014 (rebroadcast February 6, 2014) - Discussed an employee benefits practitioner’s ethical standards of conduct under Circular 230 for communications with clients and the IRS. 
Handout: Ethical Standards for Employee Benefits Practitioners

The Employee Plans Team Audit Program - November 21, 2013 -(transcript) - Discussed EPTA, our large case audit program. 
Handout: The Employee Plans Team Audit Program Presentation

How to prepare for an IRS Employee Plans Audit - August 29, 2013 - Two Sessions - Discussed latest information about the Employee Plans Examinations process.
Handout: Tools to Prepare for an Audit presentation

The Importance of Good Internal Controls - August 8, 2013 - (transcript) - Discussed how effective internal controls are essential to preventing costly mistakes that could jeopardize a retirement plan’s tax-favored status.
Handout: The Importance of Good Internal Controls presentation

EPCRS: Correcting 401(k) Plan Mistakes – Two Sessions - July 25, 2013 - (transcript) - Discussed correcting common 401(k) plan mistakes under EPCRS Revenue Procedure 2013-12, and how to find, fix and avoid them.
Handout: EPCRS: Correcting 401(k) Plan Mistakes presentation

What You Need to Know about the 403(b) Pre-Approved Plan Program - June 25, 2013 - (audio) - Discussed the upcoming 403(b) Pre-Approved Plan Program outlined in Revenue Procedure 2013-22.
Handout: 403(b) Pre-Approved Plan Program Presentation

403(b) Corrections and Examination Trends - May 23, 2013 - (audio) Discussed Revenue Procedure 2013-12 including guidance on correcting 403(b) plan failures and updates to the Employee Plans Compliance Resolution System.
Handout: 403(b) Plan Correction Issues Presentation

What You Need to Know About the IRS Final 401(k) Questionnaire Report and Next Steps - May 13, 2013 - Discussed significant findings and next steps (including outreach, guidance and compliance projects) and a new self-audit tool to help 401(k) plan sponsors avoid costly mistakes. 
Handout: Final 401(k) Questionnaire Report Presentation (Updated)

Defined Benefit Plan Update - April 23, 2013 - (transcript) - Discussed recent developments affecting defined benefit plans.
Handout: Defined Benefit Plan Update Presentation

International Issues Involving Retirement Plans in U.S. Territories  - March 21, 2013 - Discussed audit results and recurring issues of retirement plans in U.S. Territories, and Employee Plans’ 2013 fiscal year strategies and operating priorities.
Handout: International Issues Involving Retirement Plans in U.S. Territories Presentation

Overview of the 2012 Cumulative List of Plan Qualification Changes - February 28, 2013 - (audio) - Discussed the list of plan changes to by plan sponsors and practitioners submitting determination letter applications during the period beginning February 1, 2013 (Notice 2012-76).
Handout: Overview of the 2012 Cumulative List of Plan Qualification Changes Presentation

Employee Plans Compliance Resolution System Changes - February 21, 2013 - Session #1 & 2 - (audio) - Discussed Revenue Procedure 2013-12 and the various changes to the IRS correction programs.
Handout: EPCRS Changes Presentation

Ethical Standards for and Accountability of Practitioners Offering Tax Advice Relating to Employee Benefit Plans - February 13, 2013 (audio) - Discussed professional standards of conduct applicable to, and the accountability of, individuals that provide tax advice relating to employee benefit plans.  
Handout: Ethical Standards Presentation

Retirement plans can make loans, hardship distributions to Sandy victims - December 11, 2012 (audio)- Discussed Announcement 2012-44 and the options available to employees their families and plan sponsors.
Handout: Hurricane Sandy Relief Presentation

MAP-21: Changes to Segment Rates - September 27, 2012 - (audio) - Discussed the Moving Ahead for Progress in the 21st Century Act (MAP-21) and recently released related guidance.
Handout: MAP-21 Presentation

EPCRS: Correction of 401(k) Plan Mistakes (September 7, 2012) - (audio) - How to correct common mistakes in 401(k) plans.
Handouts: Correction Methods for 401(k) Failures Presentation

Lifetime Annuity Guidance (August 28, 2012) (Audio and Transcript) - Guidance designed to encourage lifetime annuity options for retirees. The presentation included Revenue Ruling 2012-3, Revenue Ruling 2012-4, and proposed regulations under sections 401(a)(9) and 417(e)(3) of the Code.
Handout: Lifetime Annuity Guidance Presentation

Operating Under the Written Plan Requirements and Common Issues Identified in 403(b) Plans (June 12, 2012) (transcript)- Frequent questions pertaining to the 403(b) written plan requirements and how the IRS is approaching the written plan requirement under audit.
Handouts: Operating Under the Written Plan Requirements and Common Issues Identified in 403(b) Plans Presentation

Governmental Plan Proposed Guidance (May 15, 2012) (transcript) - Proposed drafts of the general guidance on possible standards for determining if a retirement plan is a governmental plan under IRC section 414(d).

Indian Tribal Government Retirement Plans (April 24, 2012) - Possible standards for determining whether a plan of an Indian Tribal Government is a governmental plan within the meaning of section 414(d) of the Code.

EP Determination Letter Program Update (March 30, 2012) (transcript) - Important changes to the Employee Plans determination letter program.
Handout: EP Determination Letter Program Update Presentation

401(k) Questionnaire Interim Report IRS Phone Forum (March 6, 2012) (transcript) - 401(k) Questionnaire Interim Report, its next steps, and current issues.
Handout: 401(k) Questionnaire Interim Report Presentation

Funding-Based Benefit Restrictions - (February 23, 2012) (transcript)- funding-based benefit restrictions under IRC section 436.
Handout: Funding-Based Benefit Restrictions Presentation

Self Correction Program (SCP) and Closing Agreement Program (CAP) (November 30, 2011) (transcript) - current EPCRS issues, procedures and CAP sanctions
Handout: SCP and CAP Presentation

Determination Letter Issues Regarding Employee Stock Ownership Plans (October 28, 2011) (transcript) - technical issues affecting ESOPs and recurring issues noted in ESOP determination letter submissions
Handout: Determination Letter Issues Regarding Employee Stock Ownership Plans Presentation

Current Developments and Issues from the office of Employee Plans Rulings and Agreements (September 21, 2011) (transcript) - technical guidance hot topics and voluntary compliance applications
Handout: Current Developments and Issues Presentation

Participant Loans (September 12, 2011) (transcript) - treatment of loans as distributions, taxability and IRC §4975
Handout: Participants Loans Presentation
Helpful Links: The Fix Is In: Common Plan Mistakes - Participant Loans in 401(k) Plans; The Fix Is In: Common Plan Mistakes - Plan Loan Failures and Deemed Distributions;  Retirement Plans FAQs regarding Loans

EPCRS: Plan Correction Issues (August 25, 2011)  (transcript) - recurring issues found in EPCRS and tips to avoid common mistakes
Handout: EPCRS: Plan Correction Issues Presentation

Ethics for Employee Plans Practitioners (July 29, 2011) (transcript)- ethical standards of practice before the IRS applicable to employee benefits practitioners
Handout: Ethics for Employee Plans Practitioners Presentation

Funding Standards and Relief for Single and Multiemployer Plans (April 28, 2011) (transcript) - funding standards applicable to single and multiemployer pension plans
Handout: Funding Standards Presentation

Form 5330 - Completion and Processing Tidbits (March 24, 2011) (transcript) - proper completion and processing of the Form 5330, along with ways to avoid common mistakes
Handouts:

EP Technical Guidance (March 4, 2011) (transcript) - recent published guidance and updates on current IRS initiatives
Handout: EP Technical Guidance Presentation

In-Plan Roth Rollover Phone Forum (December 20, 2010) (Transcript) - recent guidance on in-plan Roth rollovers for 401(k) and 403(b) plans
Handout: In-Plan Roth Rollover Phone Forum Presentation

Hybrid Plans (November 23, 2010) (Transcript) - new hybrid plan regulations
Handouts:

Page Last Reviewed or Updated: 14-Mar-2014

The Military Tax Preparation

Military tax preparation 6. Military tax preparation   How To Figure Cost of Goods Sold Table of Contents Introduction Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line 42 Cost of Goods Sold Introduction If you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. Military tax preparation However, to determine these costs, you must value your inventory at the beginning and end of each tax year. Military tax preparation This chapter applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income. Military tax preparation This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. Military tax preparation However, if you work in a personal service business and also sell or charge for the materials and supplies normally used in your business, this chapter applies to you. Military tax preparation If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. Military tax preparation For more information, see chapter 2. Military tax preparation Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42 Figure your cost of goods sold by filling out lines 35 through 42 of Schedule C. Military tax preparation These lines are reproduced below and are explained in the discussion that follows. Military tax preparation 35 Inventory at beginning of year. Military tax preparation If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. Military tax preparation Do not include any amounts paid to yourself   38 Materials and supplies   39 Other costs   40 Add lines 35 through 39   41 Inventory at end of year   42 Cost of goods sold. Military tax preparation Subtract line 41 from line 40. Military tax preparation  Enter the result here and on line 4   Line 35 Inventory at Beginning of Year If you are a merchant, beginning inventory is the cost of merchandise on hand at the beginning of the year that you will sell to customers. Military tax preparation If you are a manufacturer or producer, it includes the total cost of raw materials, work in process, finished goods, and materials and supplies used in manufacturing the goods (see Inventories in chapter 2). Military tax preparation Opening inventory usually will be identical to the closing inventory of the year before. Military tax preparation You must explain any difference in a schedule attached to your return. Military tax preparation Donation of inventory. Military tax preparation   If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. Military tax preparation The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. Military tax preparation You must remove the amount of your contribution deduction from your opening inventory. Military tax preparation It is not part of the cost of goods sold. Military tax preparation   If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Military tax preparation Treat the inventory's cost as you would ordinarily treat it under your method of accounting. Military tax preparation For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. Military tax preparation   A special rule may apply to certain donations of food inventory. Military tax preparation See Publication 526, Charitable Contributions. Military tax preparation Example 1. Military tax preparation You are a calendar year taxpayer who uses an accrual method of accounting. Military tax preparation In 2013, you contributed property from inventory to a church. Military tax preparation It had a fair market value of $600. Military tax preparation The closing inventory at the end of 2012 properly included $400 of costs due to the acquisition of the property, and in 2012, you properly deducted $50 of administrative and other expenses attributable to the property as business expenses. Military tax preparation The charitable contribution allowed for 2013 is $400 ($600 − $200). Military tax preparation The $200 is the amount that would be ordinary income if you had sold the contributed inventory at fair market value on the date of the gift. Military tax preparation The cost of goods sold you use in determining gross income for 2013 must not include the $400. Military tax preparation You remove that amount from opening inventory for 2013. Military tax preparation Example 2. Military tax preparation If, in Example 1, you acquired the contributed property in 2013 at a cost of $400, you would include the $400 cost of the property in figuring the cost of goods sold for 2013 and deduct the $50 of administrative and other expenses attributable to the property for that year. Military tax preparation You would not be allowed any charitable contribution deduction for the contributed property. Military tax preparation Line 36 Purchases Less Cost of Items Withdrawn for Personal Use If you are a merchant, use the cost of all merchandise you bought for sale. Military tax preparation If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. Military tax preparation Trade discounts. Military tax preparation   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. Military tax preparation You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Military tax preparation Do not show the discount amount separately as an item in gross income. Military tax preparation   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. Military tax preparation Cash discounts. Military tax preparation   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. Military tax preparation There are two methods of accounting for cash discounts. Military tax preparation You can either credit them to a separate discount account or deduct them from total purchases for the year. Military tax preparation Whichever method you use, you must be consistent. Military tax preparation If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. Military tax preparation For more information, see Change in Accounting Method in chapter 2. Military tax preparation   If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. Military tax preparation If you use this method, do not reduce your cost of goods sold by the cash discounts. Military tax preparation Purchase returns and allowances. Military tax preparation   You must deduct all returns and allowances from your total purchases during the year. Military tax preparation Merchandise withdrawn from sale. Military tax preparation   If you withdraw merchandise for your personal or family use, you must exclude this cost from the total amount of merchandise you bought for sale. Military tax preparation Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. Military tax preparation You must also charge the amount to your drawing account. Military tax preparation   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. Military tax preparation As stated above, you also use it to record withdrawals of merchandise for personal or family use. Military tax preparation This account is also known as a “withdrawals account” or “personal account. Military tax preparation ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. Military tax preparation Small merchandisers (wholesalers, retailers, etc. Military tax preparation ) usually do not have labor costs that can properly be charged to cost of goods sold. Military tax preparation In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product. Military tax preparation Direct labor. Military tax preparation   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. Military tax preparation They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages. Military tax preparation Indirect labor. Military tax preparation   Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process. Military tax preparation Other labor. Military tax preparation   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. Military tax preparation Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs. Military tax preparation Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. Military tax preparation Those that are not used in the manufacturing process are treated as deferred charges. Military tax preparation You deduct them as a business expense when you use them. Military tax preparation Business expenses are discussed in chapter 8. Military tax preparation Line 39 Other Costs Examples of other costs incurred in a manufacturing or mining process that you charge to your cost of goods sold are as follows. Military tax preparation Containers. Military tax preparation   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. Military tax preparation If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. Military tax preparation Freight-in. Military tax preparation   Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of cost of goods sold. Military tax preparation Overhead expenses. Military tax preparation   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. Military tax preparation The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. Military tax preparation Line 40 Add Lines 35 through 39 The total of lines 35 through 39 equals the cost of the goods available for sale during the year. Military tax preparation Line 41 Inventory at End of Year Subtract the value of your closing inventory (including, as appropriate, the allocable parts of the cost of raw materials and supplies, direct labor, and overhead expenses) from line 40. Military tax preparation Inventory at the end of the year is also known as closing or ending inventory. Military tax preparation Your ending inventory will usually become the beginning inventory of your next tax year. Military tax preparation Line 42 Cost of Goods Sold When you subtract your closing inventory (inventory at the end of the year) from the cost of goods available for sale, the remainder is your cost of goods sold during the tax year. Military tax preparation Prev  Up  Next   Home   More Online Publications