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Tax Form 2012

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Tax Form 2012

Tax form 2012 Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. Tax form 2012 More information. Tax form 2012 Exception—Community Income. Tax form 2012 Exception—Qualified joint venture. Tax form 2012 More information. Tax form 2012 More information. Tax form 2012 Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. Tax form 2012 Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. Tax form 2012 Table 1 can help you learn what those responsibilities are. Tax form 2012 Ask yourself each question listed in the table, then see the related discussion to find the answer. Tax form 2012 In addition to knowing about federal taxes, you need to make some basic business decisions. Tax form 2012 Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. Tax form 2012 For information on how to contact the SBA, see How to Get More Information, later. Tax form 2012 Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. Tax form 2012 When beginning a business, you must decide which form of business to use. Tax form 2012 Legal and tax considerations enter into this decision. Tax form 2012 Only tax considerations are discussed in this publication. Tax form 2012 Your form of business determines which income tax return form you have to file. Tax form 2012 See Table 2 to find out which form you have to file. Tax form 2012 Sole proprietorships. Tax form 2012   A sole proprietorship is an unincorporated business that is owned by one individual. Tax form 2012 It is the simplest form of business organization to start and maintain. Tax form 2012 The business has no existence apart from you, the owner. Tax form 2012 Its liabilities are your personal liabilities. Tax form 2012 You undertake the risks of the business for all assets owned, whether or not used in the business. Tax form 2012 You include the income and expenses of the business on your personal tax return. Tax form 2012 More information. Tax form 2012   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. Tax form 2012 If you are a farmer, see Publication 225, Farmer's Tax Guide. Tax form 2012 Partnerships. Tax form 2012   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Tax form 2012 Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. Tax form 2012   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. Tax form 2012 , from its operations, but it does not pay income tax. Tax form 2012 Instead, it “passes through” any profits or losses to its partners. Tax form 2012 Each partner includes his or her share of the partnership's items on his or her tax return. Tax form 2012 More information. Tax form 2012   For more information on partnerships, see Publication 541, Partnerships. Tax form 2012 Husband and wife business. Tax form 2012   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Tax form 2012 Do not use Schedule C or C-EZ. Tax form 2012 Instead, file Form 1065, U. Tax form 2012 S. Tax form 2012 Return of Partnership Income. Tax form 2012 For more information, see Publication 541, Partnerships. Tax form 2012 Exception—Community Income. Tax form 2012   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Tax form 2012 S. Tax form 2012 possession, you can treat the business either as a sole proprietorship or a partnership. Tax form 2012 The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Tax form 2012 A change in your reporting position will be treated as a conversion of the entity. Tax form 2012 Exception—Qualified joint venture. Tax form 2012   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Tax form 2012 Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Tax form 2012 For an explanation of "material participation," see the Instructions for Schedule C, line G. Tax form 2012   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Tax form 2012 Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Tax form 2012 For more information, see Qualified Joint Venture in the Instructions for Schedule SE. Tax form 2012 Corporations. Tax form 2012   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. Tax form 2012 A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Tax form 2012 A corporation can also take special deductions. Tax form 2012   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. Tax form 2012 However, shareholders cannot deduct any loss of the corporation. Tax form 2012 More information. Tax form 2012   For more information on corporations, see Publication 542, Corporations. Tax form 2012 S corporations. Tax form 2012   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. Tax form 2012 Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. Tax form 2012 On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. Tax form 2012 More information. Tax form 2012   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. Tax form 2012 S. Tax form 2012 Income Tax Return for an S Corporation. Tax form 2012 Limited liability company. Tax form 2012   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Tax form 2012 The members of an LLC are not personally liable for its debts. Tax form 2012 An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. Tax form 2012 7701-3. Tax form 2012 For more information, see the instructions for Form 8832, Entity Classification Election. Tax form 2012 Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. Tax form 2012 The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). Tax form 2012 An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. Tax form 2012 An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. Tax form 2012 You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. Tax form 2012 You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. Tax form 2012 This includes returns or documents filed to report the following information. Tax form 2012 Interest, dividends, royalties, etc. Tax form 2012 , paid to you. Tax form 2012 Any amount paid to you as a dependent care provider. Tax form 2012 Certain other amounts paid to you that total $600 or more for the year. Tax form 2012 If you do not furnish your identification number as required, you may be subject to penalties. Tax form 2012 See Penalties, later. Tax form 2012 Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. Tax form 2012 If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. Tax form 2012 Applying for an EIN. Tax form 2012   You may apply for an EIN: Online—Click on the EIN link at www. Tax form 2012 irs. Tax form 2012 gov/businesses/small. Tax form 2012 The EIN is issued immediately once the application information is validated. Tax form 2012 By telephone at 1-800-829-4933. Tax form 2012 By mailing or faxing Form SS-4, Application for Employer Identification Number. Tax form 2012 When to apply. Tax form 2012   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. Tax form 2012 If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. Tax form 2012 If you apply by telephone or through the IRS website, you can get an EIN immediately. Tax form 2012 If you apply by fax, you can get an EIN within 4 business days. Tax form 2012   If you do not receive your EIN by the time a return is due, file your return anyway. Tax form 2012 Write “Applied for” and the date you applied for the number in the space for the EIN. Tax form 2012 Do not use your social security number as a substitute for an EIN on your tax returns. Tax form 2012 More than one EIN. Tax form 2012   You should have only one EIN. Tax form 2012 If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. Tax form 2012 Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Tax form 2012 The IRS will tell you which number to use. Tax form 2012 More information. Tax form 2012   For more information about EINs, see Publication 1635, Understanding Your EIN. Tax form 2012 Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). Tax form 2012 The forms used to report these payments must include the payee's identification number. Tax form 2012 Employee. Tax form 2012   If you have employees, you must get an SSN from each of them. Tax form 2012 Record the name and SSN of each employee exactly as they are shown on the employee's social security card. Tax form 2012 If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. Tax form 2012 This may occur, for example, if the employee's name has changed due to marriage or divorce. Tax form 2012   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. Tax form 2012 This form is available at SSA offices or by calling 1-800-772-1213. Tax form 2012 It is also available from the SSA website at www. Tax form 2012 ssa. Tax form 2012 gov. Tax form 2012 Other payee. Tax form 2012   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. Tax form 2012 If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. Tax form 2012   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. Tax form 2012 This form is available from IRS offices or by calling 1-800-829-3676. Tax form 2012 It is also available from the IRS website at IRS. Tax form 2012 gov. Tax form 2012    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. Tax form 2012 For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. Tax form 2012 Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. Tax form 2012 A tax year is usually 12 consecutive months. Tax form 2012 There are two kinds of tax years. Tax form 2012 Calendar tax year. Tax form 2012 A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Tax form 2012 Fiscal tax year. Tax form 2012 A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Tax form 2012 A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Tax form 2012 If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Tax form 2012 You must use a calendar tax year if: You keep no books. Tax form 2012 You have no annual accounting period. Tax form 2012 Your present tax year does not qualify as a fiscal year. Tax form 2012 You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. Tax form 2012 For more information, see Publication 538, Accounting Periods and Methods. Tax form 2012 First-time filer. Tax form 2012   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. Tax form 2012 You adopt a tax year by filing your first income tax return using that tax year. Tax form 2012 You have not adopted a tax year if you merely did any of the following. Tax form 2012 Filed an application for an extension of time to file an income tax return. Tax form 2012 Filed an application for an employer identification number. Tax form 2012 Paid estimated taxes for that tax year. Tax form 2012 Changing your tax year. Tax form 2012   Once you have adopted your tax year, you may have to get IRS approval to change it. Tax form 2012 To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. Tax form 2012 You may have to pay a fee. Tax form 2012 For more information, see Publication 538. Tax form 2012 Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. Tax form 2012 You choose an accounting method for your business when you file your first income tax return. Tax form 2012 There are two basic accounting methods. Tax form 2012 Cash method. Tax form 2012 Under the cash method, you report income in the tax year you receive it. Tax form 2012 You usually deduct or capitalize expenses in the tax year you pay them. Tax form 2012 Accrual method. Tax form 2012 Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. Tax form 2012 You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. Tax form 2012 For other methods, see Publication 538. Tax form 2012 If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. Tax form 2012 Inventories include goods held for sale in the normal course of business. Tax form 2012 They also include raw materials and supplies that will physically become a part of merchandise intended for sale. Tax form 2012 Inventories are explained in Publication 538. Tax form 2012 Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. Tax form 2012 For more information, see Publication 538. Tax form 2012 You must use the same accounting method to figure your taxable income and to keep your books. Tax form 2012 Also, you must use an accounting method that clearly shows your income. Tax form 2012 In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. Tax form 2012 An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. Tax form 2012 More than one business. Tax form 2012   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. Tax form 2012 You must keep a complete and separate set of books and records for each business. Tax form 2012 Changing your method of accounting. Tax form 2012   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Tax form 2012 A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. Tax form 2012 For examples of changes that require approval and information on how to get approval for the change, see Publication 538. Tax form 2012 Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. Tax form 2012 The following are the four general kinds of business taxes. Tax form 2012 Income tax. Tax form 2012 Self-employment tax. Tax form 2012 Employment taxes. Tax form 2012 Excise taxes. Tax form 2012 See Table 2 for the forms you file to report these taxes. Tax form 2012 You may want to get Publication 509. Tax form 2012 It has tax calendars that tell you when to file returns and make tax payments. Tax form 2012 Income Tax All businesses except partnerships must file an annual income tax return. Tax form 2012 Partnerships file an information return. Tax form 2012 Which form you use depends on how your business is organized. Tax form 2012 See Table 2 to find out which return you have to file. Tax form 2012 The federal income tax is a pay-as-you-go tax. Tax form 2012 You must pay the tax as you earn or receive income during the year. Tax form 2012 An employee usually has income tax withheld from his or her pay. Tax form 2012 If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Tax form 2012 If you are not required to make estimated tax payments, you may pay any tax due when you file your return. Tax form 2012 Table 2. Tax form 2012 Which Forms Must I File? IF you are a. Tax form 2012 . Tax form 2012 . Tax form 2012   THEN you may be liable for. Tax form 2012 . Tax form 2012 . Tax form 2012   Use Form. Tax form 2012 . Tax form 2012 . Tax form 2012 Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. Tax form 2012 2 Various other schedules may be needed. Tax form 2012 Estimated tax. Tax form 2012   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. Tax form 2012 Sole proprietors, partners, and S corporation shareholders. Tax form 2012   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Tax form 2012 Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. Tax form 2012 For more information, see Publication 505, Tax Withholding and Estimated Tax. Tax form 2012 Corporations. Tax form 2012   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Tax form 2012 Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. Tax form 2012 You must deposit the payments as explained later under Depositing Taxes. Tax form 2012 For more information, see Publication 542. Tax form 2012 Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Tax form 2012 Your payments of SE tax contribute to your coverage under the social security system. Tax form 2012 Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Tax form 2012 You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. Tax form 2012 Your net earnings from self-employment were $400 or more. Tax form 2012 You had church employee income of $108. Tax form 2012 28 or more. Tax form 2012 Use Schedule SE (Form 1040) to figure your SE tax. Tax form 2012 For more information, see Publication 334, Tax Guide for Small Business. Tax form 2012 You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. Tax form 2012 The Social Security Administration (SSA) time limit for posting self-employment income. Tax form 2012   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Tax form 2012 If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. Tax form 2012 The SSA will not change its records to increase your self-employment income. Tax form 2012 Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. Tax form 2012 Employment taxes include the following. Tax form 2012 Social security and Medicare taxes. Tax form 2012 Federal income tax withholding. Tax form 2012 Federal unemployment (FUTA) tax. Tax form 2012 If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. Tax form 2012 If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. Tax form 2012 These publications explain your tax responsibilities as an employer. Tax form 2012 If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. Tax form 2012 That publication has information to help you determine whether an individual is an employee or an independent contractor. Tax form 2012 If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. Tax form 2012 An independent contractor is someone who is self-employed. Tax form 2012 Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. Tax form 2012 Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. Tax form 2012 To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. Tax form 2012 Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Tax form 2012 Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Tax form 2012 Medicare tax pays for benefits under the hospital insurance part of FICA. Tax form 2012 You withhold part of these taxes from your employee's wages and you pay a part yourself. Tax form 2012 To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. Tax form 2012 Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. Tax form 2012 (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Tax form 2012 ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Tax form 2012 You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. Tax form 2012 You pay FUTA tax only from your own funds. Tax form 2012 Employees do not pay this tax or have it withheld from their pay. Tax form 2012 Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Tax form 2012 See Publication 15 to find out if you can use this form. Tax form 2012 Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. Tax form 2012 Form I-9. Tax form 2012   You must verify that each new employee is legally eligible to work in the United States. Tax form 2012 Both you and the employee must complete the U. Tax form 2012 S. Tax form 2012 Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Tax form 2012 You can get the form from USCIS offices or from the USCIS website at www. Tax form 2012 uscis. Tax form 2012 gov. Tax form 2012 Call the USCIS at 1-800-375-5283 for more information about your responsibilities. Tax form 2012 Form W-4. Tax form 2012   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. Tax form 2012 You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. Tax form 2012 For more information, see Publication 15. Tax form 2012 Employees claiming more than 10 withholding allowances. Tax form 2012   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. Tax form 2012 See section 16 of Publication 15. Tax form 2012 Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. Tax form 2012 You must also send copies to the Social Security Administration. Tax form 2012 See Information Returns, later, for more information on Form W-2. Tax form 2012 Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. Tax form 2012 Manufacture or sell certain products. Tax form 2012 Operate certain kinds of businesses. Tax form 2012 Use various kinds of equipment, facilities, or products. Tax form 2012 Receive payment for certain services. Tax form 2012 For more information on excise taxes, see Publication 510, Excise Taxes. Tax form 2012 Form 720. Tax form 2012   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. Tax form 2012 Environmental taxes. Tax form 2012 Communications and air transportation taxes. Tax form 2012 Fuel taxes. Tax form 2012 Tax on the first retail sale of heavy trucks, trailers, and tractors. Tax form 2012 Manufacturers taxes on the sale or use of a variety of different articles. Tax form 2012 Form 2290. Tax form 2012   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. Tax form 2012 The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Tax form 2012 Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. Tax form 2012 For more information, see the instructions for Form 2290. Tax form 2012 Form 730. Tax form 2012   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Tax form 2012 Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. Tax form 2012 Form 11-C. Tax form 2012   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. Tax form 2012 Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. Tax form 2012 Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). Tax form 2012 Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. Tax form 2012 Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. Tax form 2012 Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. Tax form 2012 The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. Tax form 2012 You must give a copy of each information return you are required to file to the recipient or payer. Tax form 2012 In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. Tax form 2012 For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. Tax form 2012 Form 1099-MISC. Tax form 2012   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. Tax form 2012 These payments include the following items. Tax form 2012 Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. Tax form 2012 Rent payments of $600 or more, other than rents paid to real estate agents. Tax form 2012 Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. Tax form 2012 Royalty payments of $10 or more. Tax form 2012 Payments to certain crew members by operators of fishing boats. Tax form 2012 You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. Tax form 2012 Form W-2. Tax form 2012   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. Tax form 2012 For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. Tax form 2012 Form 8300. Tax form 2012   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. Tax form 2012 Cash includes U. Tax form 2012 S. Tax form 2012 and foreign coin and currency. Tax form 2012 It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Tax form 2012 For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). Tax form 2012 Penalties The law provides penalties for not filing returns or paying taxes as required. Tax form 2012 Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. Tax form 2012 Failure to file tax returns. Tax form 2012   If you do not file your tax return by the due date, you may have to pay a penalty. Tax form 2012 The penalty is based on the tax not paid by the due date. Tax form 2012 See your tax return instructions for more information about this penalty. Tax form 2012 Failure to pay tax. Tax form 2012   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. Tax form 2012 For more information, see your tax return instructions. Tax form 2012 Failure to withhold, deposit, or pay taxes. Tax form 2012   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. Tax form 2012 You may also be subject to penalties if you deposit the taxes late. Tax form 2012 For more information, see Publication 15. Tax form 2012 Failure to follow information reporting requirements. Tax form 2012   The following penalties apply if you are required to file information returns. Tax form 2012 For more information, see the General Instructions for Certain Information Returns. Tax form 2012 Failure to file information returns. Tax form 2012 A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. Tax form 2012 Failure to furnish correct payee statements. Tax form 2012 A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. Tax form 2012 Waiver of penalty. Tax form 2012   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. Tax form 2012   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. Tax form 2012 (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. Tax form 2012 ) Failure to supply taxpayer identification number. Tax form 2012   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. Tax form 2012 You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. Tax form 2012 Business Expenses You can deduct business expenses on your income tax return. Tax form 2012 These are the current operating costs of running your business. Tax form 2012 To be deductible, a business expense must be both ordinary and necessary. Tax form 2012 An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Tax form 2012 A necessary expense is one that is helpful and appropriate for your business, trade, or profession. Tax form 2012 An expense does not have to be indispensable to be considered necessary. Tax form 2012 The following are brief explanations of some expenses that are of interest to people starting a business. Tax form 2012 There are many other expenses that you may be able to deduct. Tax form 2012 See your form instructions and Publication 535, Business Expenses. Tax form 2012 Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. Tax form 2012 Your business start-up costs will depend on the type of business you are starting. Tax form 2012 They may include costs for advertising, travel, surveys, and training. Tax form 2012 These costs are generally capital expenses. Tax form 2012 You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). Tax form 2012 You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. Tax form 2012 The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Tax form 2012 Any remaining cost must be amortized. Tax form 2012 For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. Tax form 2012 Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Tax form 2012 You must spread the cost over more than one tax year and deduct part of it each year. Tax form 2012 This method of deducting the cost of business property is called depreciation. Tax form 2012 Business property you must depreciate includes the following items. Tax form 2012 Office furniture. Tax form 2012 Buildings. Tax form 2012 Machinery and equipment. Tax form 2012 You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Tax form 2012 This deduction is known as the “section 179 deduction. Tax form 2012 ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. Tax form 2012 Depreciation must be taken in the year it is allowable. Tax form 2012 Allowable depreciation not taken in a prior year cannot be taken in the current year. Tax form 2012 If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. Tax form 2012 S. Tax form 2012 Individual Income Tax Return, or by changing your accounting method. Tax form 2012 For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. Tax form 2012 Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. Tax form 2012 Even then, your deduction may be limited. Tax form 2012 To qualify to claim expenses for business use of your home, you must meet both the following tests. Tax form 2012 Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. Tax form 2012 Exclusive use. Tax form 2012   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Tax form 2012 The area used for business can be a room or other separately identifiable space. Tax form 2012 The space does not need to be marked off by a permanent partition. Tax form 2012   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Tax form 2012 Exceptions to exclusive use. Tax form 2012   You do not have to meet the exclusive use test if either of the following applies. Tax form 2012 You use part of your home for the storage of inventory or product samples. Tax form 2012 You use part of your home as a daycare facility. Tax form 2012 For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Tax form 2012 Principal place of business. Tax form 2012   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Tax form 2012 You use it exclusively and regularly for administrative or management activities of your trade or business. Tax form 2012 You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Tax form 2012   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Tax form 2012 The relative importance of the activities performed at each location. Tax form 2012 If the relative importance factor does not determine your principal place of business, the time spent at each location. Tax form 2012    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Tax form 2012 However, for other ways to qualify to deduct home office expenses, see Publication 587. Tax form 2012 Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Tax form 2012 If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. Tax form 2012 More information. Tax form 2012   For more information about business use of your home, see Publication 587. Tax form 2012 Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. Tax form 2012 You generally can deduct either your actual expenses or the standard mileage rate. Tax form 2012 Actual expenses. Tax form 2012   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Tax form 2012 You can divide your expenses based on the miles driven for each purpose. Tax form 2012 Example. Tax form 2012 You are the sole proprietor of a flower shop. Tax form 2012 You drove your van 20,000 miles during the year. Tax form 2012 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. Tax form 2012 You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Tax form 2012 Standard mileage rate. Tax form 2012   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Tax form 2012 You can use the standard mileage rate for a vehicle you own or lease. Tax form 2012 The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. Tax form 2012 It is announced annually by the IRS. Tax form 2012 To figure your deduction, multiply your business miles by the standard mileage rate for the year. Tax form 2012    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. Tax form 2012 However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. Tax form 2012 Choosing the standard mileage rate. Tax form 2012   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Tax form 2012 In later years, you can choose to use either the standard mileage rate or actual expenses. Tax form 2012   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Tax form 2012 Additional information. Tax form 2012   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Tax form 2012 Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. Tax form 2012 It also explains how long you must keep your records for federal tax purposes. Tax form 2012 A sample recordkeeping system is illustrated at the end of this part. Tax form 2012 Why Keep Records? Everyone in business must keep records. Tax form 2012 Good records will help you do the following. Tax form 2012 Monitor the progress of your business. Tax form 2012   You need good records to monitor the progress of your business. Tax form 2012 Records can show whether your business is improving, which items are selling, or what changes you need to make. Tax form 2012 Good records can increase the likelihood of business success. Tax form 2012 Prepare your financial statements. Tax form 2012   You need good records to prepare accurate financial statements. Tax form 2012 These include income (profit and loss) statements and balance sheets. Tax form 2012 These statements can help you in dealing with your bank or creditors and help you manage your business. Tax form 2012 An income statement shows the income and expenses of the business for a given period of time. Tax form 2012 A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Tax form 2012 Identify source of receipts. Tax form 2012   You will receive money or property from many sources. Tax form 2012 Your records can identify the source of your receipts. Tax form 2012 You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. Tax form 2012 Keep track of deductible expenses. Tax form 2012   You may forget expenses when you prepare your tax return unless you record them when they occur. Tax form 2012 Prepare your tax returns. Tax form 2012   You need good records to prepare your tax returns. Tax form 2012 These records must support the income, expenses, and credits you report. Tax form 2012 Generally, these are the same records you use to monitor your business and prepare your financial statements. Tax form 2012 Support items reported on tax returns. Tax form 2012   You must keep your business records available at all times for inspection by the IRS. Tax form 2012 If the IRS examines any of your tax returns, you may be asked to explain the items reported. Tax form 2012 A complete set of records will speed up the examination. Tax form 2012 Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Tax form 2012 You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. Tax form 2012 The business you are in affects the type of records you need to keep for federal tax purposes. Tax form 2012 You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Tax form 2012 See Accounting Method, earlier. Tax form 2012 If you are in more than one business, you should keep a complete and separate set of records for each business. Tax form 2012 A corporation should keep minutes of board of directors' meetings. Tax form 2012 Your recordkeeping system should include a summary of your business transactions. Tax form 2012 This summary is ordinarily made in your books (for example, accounting journals and ledgers). Tax form 2012 Your books must show your gross income, as well as your deductions and credits. Tax form 2012 For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. Tax form 2012 In addition, you must keep supporting documents, explained later. Tax form 2012 Electronic records. Tax form 2012   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Tax form 2012 When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Tax form 2012 An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Tax form 2012 The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Tax form 2012 All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Tax form 2012 Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Tax form 2012   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Tax form 2012 You still have the responsibility of retaining any other books and records that are required to be retained. Tax form 2012   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Tax form 2012 This test is not considered an examination and the results must be shared with you. Tax form 2012 If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Tax form 2012 If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. Tax form 2012 For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. Tax form 2012 Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Tax form 2012 Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. Tax form 2012 These documents contain information you need to record in your books. Tax form 2012 It is important to keep these documents because they support the entries in your books and on your tax return. Tax form 2012 Keep them in an orderly fashion and in a safe place. Tax form 2012 For instance, organize them by year and type of income or expense. Tax form 2012 Gross receipts. Tax form 2012   Gross receipts are the income you receive from your business. Tax form 2012 You should keep supporting documents that show the amounts and sources of your gross receipts. Tax form 2012 Documents that show gross receipts include the following. Tax form 2012 Cash register tapes. Tax form 2012 Bank deposit slips. Tax form 2012 Receipt books. Tax form 2012 Invoices. Tax form 2012 Credit card charge slips. Tax form 2012 Forms 1099-MISC. Tax form 2012 Purchases. Tax form 2012   Purchases are the items you buy and resell to customers. Tax form 2012 If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Tax form 2012 Your supporting documents should show the amount paid and that the amount was for purchases. Tax form 2012 Documents for purchases include the following. Tax form 2012 Canceled checks. Tax form 2012 Cash register tape receipts. Tax form 2012 Credit card sales slips. Tax form 2012 Invoices. Tax form 2012 These records will help you determine the value of your inventory at the end of the year. Tax form 2012 See Publication 538 for information on methods for valuing inventory. Tax form 2012 Expenses. Tax form 2012   Expenses are the costs you incur (other than purchases) to carry on your business. Tax form 2012 Your supporting documents should show the amount paid and that the amount was for a business expense. Tax form 2012 Documents for expenses include the following. Tax form 2012 Canceled checks. Tax form 2012 Cash register tapes. Tax form 2012 Account statements. Tax form 2012 Credit card sales slips. Tax form 2012 Invoices. Tax form 2012 Petty cash slips for small cash payments. Tax form 2012    A petty cash fund allows you to make small payments without having to write checks for small amounts. Tax form 2012 Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. Tax form 2012 Travel, transportation, entertainment, and gift expenses. Tax form 2012   Specific recordkeeping rules apply to these expenses. Tax form 2012 For more information, see Publication 463. Tax form 2012 Employment taxes. Tax form 2012   There are specific employment tax records you must keep. Tax form 2012 For a list, see Publication 15. Tax form 2012 Assets. Tax form 2012   Assets are the property, such as machinery and furniture you own and use in your business. Tax form 2012 You must keep records to verify certain information about your business assets. Tax form 2012 You need records to figure the annual depreciation and the gain or loss when you sell the assets. Tax form 2012 Your records should show the following information. Tax form 2012 When and how you acquired the asset. Tax form 2012 Purchase price. Tax form 2012 Cost of any improvements. Tax form 2012 Section 179 deduction taken. Tax form 2012 Deductions taken for depreciation. Tax form 2012 Deductions taken for casualty losses, such as losses resulting from fires or storms. Tax form 2012 How you used the asset. Tax form 2012 When and how you disposed of the asset. Tax form 2012 Selling price. Tax form 2012 Expenses of sale. Tax form 2012   The following documents may show this information. Tax form 2012 Purchase and sales invoices. Tax form 2012 Real estate closing statements. Tax form 2012 Canceled checks. Tax form 2012 What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Tax form 2012 These include account statements prepared for the financial institution by a third party. Tax form 2012 These account statements must be highly legible. Tax form 2012 The following table lists acceptable account statements. Tax form 2012  IF payment is by. Tax form 2012 . Tax form 2012 . Tax form 2012 THEN the statement must show the. Tax form 2012 . Tax form 2012 . Tax form 2012 Check Check number. Tax form 2012 Amount. Tax form 2012 Payee's name. Tax form 2012 Date the check amount was posted to the account by the financial institution. Tax form 2012 Electronic funds transfer Amount transferred. Tax form 2012 Payee's name. Tax form 2012 Date the transfer was posted to the account by the financial institution. Tax form 2012 Credit card Amount charged. Tax form 2012 Payee's name. Tax form 2012 Transaction date. Tax form 2012    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Tax form 2012 You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Tax form 2012 Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. Tax form 2012 (Your business transactions are shown on the supporting documents just discussed. Tax form 2012 ) Business transactions are ordinarily summarized in books called journals and ledgers. Tax form 2012 You can buy them at your local stationery or office supply store. Tax form 2012 A journal is a book where you record each business transaction shown on your supporting documents. Tax form 2012 You may have to keep separate journals for transactions that occur frequently. Tax form 2012 A ledger is a book that contains the totals from all of your journals. Tax form 2012 It is organized into different accounts. Tax form 2012 Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. Tax form 2012 For example, a recordkeeping system for a small business might include the following items. Tax form 2012 Business checkbook. Tax form 2012 Daily summary of cash receipts. Tax form 2012 Monthly summary of cash receipts. Tax form 2012 Check disbursements journal. Tax form 2012 Depreciation worksheet. Tax form 2012 Employee compensation record. Tax form 2012 The business checkbook is explained next. Tax form 2012 The other items are illustrated later under Sample Record System. Tax form 2012 The system you use to record business transactions will be more effective if you follow good recordkeeping practices. Tax form 2012 For example, record expenses when they occur, and identify the source of recorded receipts. Tax form 2012 Generally, it is best to record transactions on a daily basis. Tax form 2012 Business checkbook. Tax form 2012   One of the first things you should do when you start a business is open a business checking account. Tax form 2012 You should keep your business account separate from your personal checking account. Tax form 2012   The business checkbook is your basic source of information for recording your business expenses. Tax form 2012 You should deposit all daily receipts in your business checking account. Tax form 2012 You should check your account for errors by reconciling it. Tax form 2012 See Reconciling the checking account, later. Tax form 2012   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. Tax form 2012 You should also note on the deposit slip the source of the deposit and keep copies of all slips. Tax form 2012   You should make all payments by check to document business expenses. Tax form 2012 Write checks payable to yourself only when making withdrawals from your business for personal use. Tax form 2012 Avoid writing checks payable to cash. Tax form 2012 If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. Tax form 2012 If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. Tax form 2012    Use the business account for business purposes only. Tax form 2012 Indicate the source of deposits and the type of expense in the checkbook. Tax form 2012 Reconciling the checking account. Tax form 2012   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. Tax form 2012 The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. Tax form 2012   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. Tax form 2012    You should reconcile your checking account each month. Tax form 2012     Before you reconcile your monthly bank statement, check your own figures. Tax form 2012 Begin with the balance shown in your checkbook at the end of the previous month. Tax form 2012 To this balance, add the total cash deposited during the month and subtract the total cash disbursements. Tax form 2012   After checking your figures, the result should agree with your checkbook balance at the end of the month. Tax form 2012 If the result does not agree, you may have made an error in recording a check or deposit. Tax form 2012 You can find the error by doing the following. Tax form 2012 Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. Tax form 2012 If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. Tax form 2012 Adding the deposit amounts in your checkbook. Tax form 2012 Compare that total with the monthly total in your cash receipt book, if you have one. Tax form 2012 If the totals do not agree, check the individual amounts to find any errors. Tax form 2012   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. Tax form 2012   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. Tax form 2012 Many banks print a reconciliation worksheet on the back of the statement. Tax form 2012   To reconcile your account, follow these steps. Tax form 2012 Compare the deposits listed on the bank statement with the deposits shown in your checkbook. Tax form 2012 Note all differences in the dollar amounts. Tax form 2012 Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. Tax form 2012 Note all differences in the dollar amounts. Tax form 2012 Mark the check number in the checkbook as having cleared the bank. Tax form 2012 After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. Tax form 2012 Prepare a bank reconciliation. Tax form 2012 One is illustrated later under Sample Record System. Tax form 2012 Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. Tax form 2012 At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. Tax form 2012 If you still have differences, check the previous steps to find the errors. Tax form 2012   Table 3. Tax form 2012 Period of Limitations IF you. Tax form 2012 . Tax form 2012 . Tax form 2012   THEN the period is. Tax form 2012 . Tax form 2012 . Tax form 2012 1. Tax form 2012 Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. Tax form 2012 Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. Tax form 2012 File a fraudulent return   Not limited 4. Tax form 2012 Do not file a return   Not limited 5. Tax form 2012 File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. Tax form 2012 File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. Tax form 2012 The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. Tax form 2012 You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. Tax form 2012 Single-entry. Tax form 2012   A single-entry system is based on the income statement (profit or loss statement). Tax form 2012 It can be a simple and practical system if you are starting a small business. Tax form 2012 The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. Tax form 2012 Double-entry. Tax form 2012   A double-entry bookkeeping system uses journals and ledgers. Tax form 2012 Transactions are first entered in a journal and then posted to ledger accounts. Tax form 2012 These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). Tax form 2012 You close income and expense accounts at the end of each tax year. Tax form 2012 You keep asset, liability, and net worth accounts open on a permanent basis. Tax form 2012   In the double-entry system, each account has a left side for debits and a right side for credits. Tax form 2012 It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. Tax form 2012   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. Tax form 2012 If the amounts do not balance, you have made an error and you must find and correct it. Tax form 2012   An example of a journal entry exhibiting a payment of rent in October is shown next. Tax form 2012 General Journal Date Description of Entry Debit  Credit Oct. Tax form 2012 5 Rent expense 780. Tax form 2012 00     Cash   780. Tax form 2012 00                 Computerized System There are computer software packages you can use for recordkeeping. Tax form 2012 They can be purchased in many retail stores. Tax form 2012 These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. Tax form 2012 If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. Tax form 2012 To meet this qualification, the machine-sensible records must reconcile with your books and return. Tax form 2012 These records must provide enough detail to identify the underlying source documents. Tax form 2012 You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. Tax form 2012 This documentation must be sufficiently detailed to show all of the following items. Tax form 2012 Functions being performed as the data flows through the system. Tax form 2012 Controls used to ensure accurate and reliable processing. Tax form 2012 Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. Tax form 2012 Charts of accounts and detailed account descriptions. Tax form 2012 See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. Tax form 2012 How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Tax form 2012 Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. Tax form 2012 The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Tax form 2012 Table 3 contains the periods of limitations that apply to income tax returns. Tax form 2012 Unless otherwise stated, the years refer to the period after the return was filed. Tax form 2012 Returns filed before the due date are treated as filed on the due date. Tax form 2012 Keep copies of your filed tax returns. Tax form 2012 They help in preparing future tax returns and making computations if you file an amended return. Tax form 2012 Employment taxes. Tax form 2012   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Tax form 2012 For more information about recordkeeping for employment taxes, see Publication 15. Tax form 2012 Assets. Tax form 2012   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Tax form 2012 You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. Tax form 2012   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. Tax form 2012 You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Tax form 2012 Records for nontax purposes. Tax form 2012   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Tax form 2012 For example, your insurance company or creditors may require you to keep them longer than the IRS does. Tax form 2012 Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. Tax form 2012 Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. Tax form 2012 These sample records should not be viewed as a recommendation of how to keep your records. Tax form 2012 They are intended only to show how one business keeps its records. Tax form 2012 1. Tax form 2012 Daily Summary of Cash Receipts This summary is a record of cash sales for the day. Tax form 2012 It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. Tax form 2012 Henry takes the cash sales entry from his cash register tape. Tax form 2012 If he had no cash register, he would simply total his cash sale slips and any other cash received that day. Tax form 2012 He carries the total receipts shown in this summary for January 3 ($267. Tax form 2012 80), including cash sales ($263. Tax form 2012 60) and sales tax ($4. Tax form 2012 20), to the Monthly Summary of Cash Receipts. Tax form 2012 Petty cash fund. Tax form 2012   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. Tax form 2012 Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. Tax form 2012 He sets up a fixed amount ($50) in his petty cash fund. Tax form 2012 The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. Tax form 2012 When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. Tax form 2012 (See the Check Disbursements Journal entry for check number 92. Tax form 2012 ) This restores the fund to its fixed amount of $50. Tax form 2012 He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. Tax form 2012 2. Tax form 2012 Monthly Summary of Cash Receipts This shows the income activity for the month. Tax form 2012 Henry carries the total monthly net sales shown in this summary for January ($4,865. Tax form 2012 05) to his Annual Summary. Tax form 2012 To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. Tax form 2012 He cannot take a deduction for sales tax turned over to the state because he only collected the tax. Tax form 2012 He does not include the tax in his income. Tax form 2012 3. Tax form 2012 Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. Tax form 2012 All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. Tax form 2012 Frequent expenses have their own headings across the sheet. Tax form 2012 He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. Tax form 2012 Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. Tax form 2012 Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. Tax form 2012 If he did, he would record them in the journal, even though he could not deduct them as business expenses. Tax form 2012 Henry carries the January total of expenses for materials ($1,083. Tax form 2012 50) to the Annual Summary. Tax form 2012 Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. Tax form 2012 , in the appropriate columns of that summary. Tax form 2012 4. Tax form 2012 Employee Compensation Record This record shows the following information. Tax form 2012 The number of hours Henry's employee worked in a pay period. Tax form 2012 The employee's total pay for the period. Tax form 2012 The deductions Henry withheld in figuring the employee's net pay. Tax form 2012 The monthly gross payroll. Tax form 2012 Henry carries the January gross payroll ($520) to the Annual Summary. Tax form 2012 5. Tax form 2012 Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. Tax form 2012 He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. Tax form 2012 He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. Tax form 2012 As in the journal, he keeps each major expense in a separate column. Tax form 2012 Henry carries the cash receipts total shown in the annual summary ($47,440. Tax form 2012 9
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Free File: Frequently Asked Questions

Find more information at www.freefile.irs.gov

What is Free File? 
Free File provides free federal tax prep and e-file for taxpayers, either through brand-name software or online fillable forms. This year, you have until April 15, 2014, to file and pay your taxes or request an extension.  

Who can use Free File?
You can, if your  Adjusted Gross Income (AGI) was $58,000 or less in 2013. You can use free brand-name software. You can find the company that’s best for you using the “Help Me Find Free File Software" tool. If your income was higher than $58,000, Free File Fillable Forms is available.

May I also file my state return for free?
Some participating Free File companies offer free state tax prep and e-file. Check the company's Free File home page to learn if free state income tax prep and e-file are available.

Note: AK, FL, NV, NH, SD, TN, TX, WA and WY do not have a state income tax return filing requirement for reporting W2 wage income. Two of these, NH and TN, require taxpayers to file returns for individual interest and dividend income.  

What forms and schedules can I  use to Free File?
Free File offers the most commonly filed forms/schedules. Review the list of most commonly filed forms. If a form/schedule is not listed, check the company's website for more information.

May I use Free File to e-file my prior year return? 
No. We are not set-up to accept prior year Free File returns electronically.    

How do I get a copy of my return? 
Always remember to print your return after you successfully e-file. If you forget to print your return, order a free
transcript from IRS. Depending on the type of transcript your request, you'll get more or less of the information from your return. 

Is customer support service available for Free File?
Yes. Access the Free File company's website to find customer support contact information. Browse the company’s website to find free customer service options such as online assistance, or an e-mail address for technical and/or tax law assistance. Direct specific questions about your individual tax return to the tax software company you are using. Contact the Free File company to resolve issues related to the company’s software. If you are not able to resolve your issue, try another Free File company’s software. 

Where do I enter the six-digit Identity Protection PIN?
If the IRS sent you a letter with an Identity Protection PIN, enter the six-digit PIN in the appropriate place in the Free File software you have selected. 

Where can I find answers to tax law questions? You can get answers to many questions on IRS.gov. Try the Interactive Tax Assistant, use Search in the upper right corner of IRS.gov, and check Tax Topics, Help and Resources and Individuals. If you still don’t find the answer to your question, call our toll-free tax assistance line at 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business tax questions.

What can I do if I am not able to get into a Free File company from the IRS.gov website?
This problem may be due to your Internet service provider, your Internet security software and/or your IT department blocking expected information in the web request from your browser. This information is necessary to protect both you and IRS.gov systems from improper use such as phishing and other security threats. Unfortunately, due to the many differences between Internet browsers and individual computer configurations, we are unable to suggest Internet settings or configurations for you. Try selecting another company, use another computer or another browser. 

Does Free File use secure technologies?
Yes. We approve the Free File companies’ proprietary software. All Free File companies must get third-party privacy and security certificates. Taxpayers enter tax information in a secure session and the Free File companies transmit tax returns using secure technologies. In addition, the Free File tax software companies must comply with all federal rules governing e-filing and regulations covering taxpayer privacy. The companies may not disclose or use tax return information for purposes other than tax return preparation without the knowing, informed and voluntary consent of the taxpayer. These companies are also subject to the Federal Trade Commission Privacy and Safeguards Rules.

What information will the IRS collect or retain about me using Free File?
None. Our policy prohibits the use of permanent Internet cookies. We sometimes use “temporary” or “session” cookies to make sure you are the correct recipient of information you requested. These are deleted when your Internet visit ends.

Can a Free File company share my information with anybody besides the IRS?
No. As part of the agreement, the Free File Alliance companies must comply with our strict privacy standards. In accordance with Treasury regulations, the companies may not disclose your tax return information without your permission.

Page Last Reviewed or Updated: 16-Jan-2014

The Tax Form 2012

Tax form 2012 5. Tax form 2012   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Tax form 2012 Making the election. Tax form 2012 Form 3115. Tax form 2012 Income TaxesAccrual of contested income taxes. Tax form 2012 Employment Taxes Other TaxesAdditional Medicare Tax. Tax form 2012 What's New Additional Medicare Tax. Tax form 2012  Beginning in 2013, you must withhold a 0. Tax form 2012 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Tax form 2012 Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Tax form 2012 See Employment Taxes , and Self-employment tax , later. Tax form 2012 Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Tax form 2012 You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Tax form 2012 Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Tax form 2012 When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Tax form 2012 This applies whether you use the cash method or an accrual method of accounting. Tax form 2012 Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Tax form 2012 You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Tax form 2012 Limit on accrual of taxes. Tax form 2012   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Tax form 2012 However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Tax form 2012 Example. Tax form 2012 Your state imposes a tax on personal property used in a trade or business conducted in the state. Tax form 2012 This tax is assessed and becomes a lien as of July 1 (accrual date). Tax form 2012 In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Tax form 2012 Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Tax form 2012 You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Tax form 2012 Uniform capitalization rules. Tax form 2012   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Tax form 2012 They also apply to certain taxpayers who acquire property for resale. Tax form 2012 Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Tax form 2012 For more information, see chapter 1. Tax form 2012 Carrying charges. Tax form 2012   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Tax form 2012 You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Tax form 2012 For more information, see chapter 7. Tax form 2012 Refunds of taxes. Tax form 2012   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Tax form 2012 For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Tax form 2012    You must include in income any interest you receive on tax refunds. Tax form 2012 Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Tax form 2012 The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Tax form 2012 Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Tax form 2012 See Taxes for local benefits , later. Tax form 2012 If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Tax form 2012 However, you can elect to ratably accrue the taxes during the year. Tax form 2012 See Electing to ratably accrue , later. Tax form 2012 Taxes for local benefits. Tax form 2012   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Tax form 2012 These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Tax form 2012 You should increase the basis of your property by the amount of the assessment. Tax form 2012   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Tax form 2012 If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Tax form 2012 Example. Tax form 2012 To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Tax form 2012 The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Tax form 2012 The city is paying the principal and interest with the annual payments made by the property owners. Tax form 2012 The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Tax form 2012 The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Tax form 2012 Charges for services. Tax form 2012   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Tax form 2012 Purchase or sale of real estate. Tax form 2012   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Tax form 2012   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Tax form 2012 Treat the seller as paying the taxes up to but not including the date of sale. Tax form 2012 Treat the buyer as paying the taxes beginning with the date of sale. Tax form 2012 You can usually find this information on the settlement statement you received at closing. Tax form 2012   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Tax form 2012 Example. Tax form 2012 Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Tax form 2012 He has not elected to ratably accrue property taxes. Tax form 2012 November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Tax form 2012 He sold the property on June 30, 2013. Tax form 2012 Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Tax form 2012 He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. Tax form 2012 Electing to ratably accrue. Tax form 2012   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Tax form 2012 Example. Tax form 2012 Juan Sanchez is a calendar year taxpayer who uses an accrual method. Tax form 2012 His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Tax form 2012 July 1 is the assessment and lien date. Tax form 2012 If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Tax form 2012 Separate elections. Tax form 2012   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Tax form 2012 Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Tax form 2012 See Form 3115 , later. Tax form 2012 Making the election. Tax form 2012   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Tax form 2012 The statement should show all the following items. Tax form 2012 The trades or businesses to which the election applies and the accounting method or methods used. Tax form 2012 The period to which the taxes relate. Tax form 2012 The computation of the real estate tax deduction for that first year. Tax form 2012   Generally, you must file your return by the due date (including extensions). Tax form 2012 However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Tax form 2012 Attach the statement to the amended return and write “Filed pursuant to section 301. Tax form 2012 9100-2” on the statement. Tax form 2012 File the amended return at the same address where you filed the original return. Tax form 2012 Form 3115. Tax form 2012    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Tax form 2012 For more information, including applicable time frames for filing, see the Instructions for Form 3115. Tax form 2012 Note. Tax form 2012 If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Tax form 2012 R. Tax form 2012 B. Tax form 2012 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Tax form 2012 R. Tax form 2012 B. Tax form 2012 689, and Revenue Procedure 2012-20, 2012-14 I. Tax form 2012 R. Tax form 2012 B. Tax form 2012 700, or any successor. Tax form 2012 Revenue Procedure 2011-14 is available at  www. Tax form 2012 irs. Tax form 2012 gov/irb/2011-04IRB/ar08. Tax form 2012 html. Tax form 2012 Income Taxes This section discusses federal, state, local, and foreign income taxes. Tax form 2012 Federal income taxes. Tax form 2012   You cannot deduct federal income taxes. Tax form 2012 State and local income taxes. Tax form 2012   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Tax form 2012 An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Tax form 2012   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Tax form 2012 Accrual of contested income taxes. Tax form 2012   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Tax form 2012   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Tax form 2012 You cannot deduct them in the year in which the liability is finally determined. Tax form 2012    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Tax form 2012 Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Tax form 2012   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Tax form 2012 You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Tax form 2012 For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Tax form 2012 Foreign income taxes. Tax form 2012   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Tax form 2012 S. Tax form 2012 possession. Tax form 2012 However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Tax form 2012 S. Tax form 2012 tax under the foreign earned income exclusion or the foreign housing exclusion. Tax form 2012 For information on these exclusions, see Publication 54, Tax Guide for U. Tax form 2012 S. Tax form 2012 Citizens and Resident Aliens Abroad. Tax form 2012 For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Tax form 2012 Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Tax form 2012 Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Tax form 2012 You may also need to pay certain employment taxes from your own funds. Tax form 2012 These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Tax form 2012 Note. Tax form 2012 Additional Medicare Tax is only imposed on the employee. Tax form 2012 There is no employer share of Additional Medicare Tax. Tax form 2012 Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Tax form 2012 You can deduct the employment taxes you must pay from your own funds as taxes. Tax form 2012 Example. Tax form 2012 You pay your employee $18,000 a year. Tax form 2012 However, after you withhold various taxes, your employee receives $14,500. Tax form 2012 You also pay an additional $1,500 in employment taxes. Tax form 2012 You should deduct the full $18,000 as wages. Tax form 2012 You can deduct the $1,500 you pay from your own funds as taxes. Tax form 2012 For more information on employment taxes, see Publication 15 (Circular E). Tax form 2012 Unemployment fund taxes. Tax form 2012   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Tax form 2012 Deduct these payments as taxes. Tax form 2012 Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Tax form 2012 Excise taxes. Tax form 2012   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Tax form 2012 However, see Fuel taxes , later. Tax form 2012   For more information on excise taxes, see Publication 510. Tax form 2012 Franchise taxes. Tax form 2012   You can deduct corporate franchise taxes as a business expense. Tax form 2012 Fuel taxes. Tax form 2012   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Tax form 2012 Do not deduct these taxes as a separate item. Tax form 2012   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Tax form 2012 For more information, see Publication 510. Tax form 2012 Occupational taxes. Tax form 2012   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Tax form 2012 Personal property tax. Tax form 2012   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Tax form 2012 Sales tax. Tax form 2012   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Tax form 2012 If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Tax form 2012 If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Tax form 2012 If the property is depreciable, add the sales tax to the basis for depreciation. Tax form 2012 For more information on basis, see Publication 551. Tax form 2012    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Tax form 2012 Also, do not include these taxes in gross receipts or sales. Tax form 2012 Self-employment tax. Tax form 2012   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Tax form 2012 This deduction only affects your income tax. Tax form 2012 It does not affect your net earnings from self-employment or your self-employment tax. Tax form 2012   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Tax form 2012   For more information on self-employment tax, see Publication 334. Tax form 2012 Additional Medicare Tax. Tax form 2012   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Tax form 2012 See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Tax form 2012 Prev  Up  Next   Home   More Online Publications