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Turbotax Free State Efile

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Turbotax Free State Efile

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Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line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free state efile If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor.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

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

 City Street Address  Days/Hours of Service  Telephone* 
Billings  2900 4th Ave. N.
Billings, MT 59101 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(406) 247-7446 
Bozeman  1805 S. 22nd Ave.
Bozeman, MT 59718 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(406) 582-8671 
Great Falls  11 5th St. N.
Great Falls, MT 59401 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(406) 761-8095 
Helena  10 W. 15th St., Ste. 2300
Helena, MT 59626 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(406) 441-1039 
Kalispell  275 Corporate Ave.
Kalispell, MT 59901 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

Services Provided

(406) 752-6636 
Missoula  2681 Palmer St.
Missoula, MT 59808 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
 

Services Provided

(406) 728-9127 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call 406-444-8668 in the Helena area or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
10 W. 15th, STE 2300
 MS 6610-HLN
Helena, MT 59626

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Turbotax Free State Efile

Turbotax free state efile Car Expenses Table of Contents Introduction Depreciation of CarSpecial Depreciation Allowance Depreciation Limit Amended Return Election Not To Claim Special Allowance If you purchased a car after September 10, 2001, for use in your business (or as an employee) and figure your deductible expenses using the actual car expense method, new law contains provisions that may affect your depreciation deduction for that car. Turbotax free state efile Publication 463, Travel, Entertainment, Gift, and Car Expenses, contains information on figuring depreciation on your car. Turbotax free state efile However, Publication 463 does not contain the new provisions because it was printed before the law was enacted. Turbotax free state efile The new provisions are in the Supplement to Publication 463, which is reprinted below. Turbotax free state efile Supplement to Publication 463 Travel, Entertainment, Gift, and Car Expenses   Introduction This supplemental publication is for taxpayers who purchased a car for business purposes after September 10, 2001, and figure their deductible expenses, including a deduction for depreciation, using the actual car expense method. Turbotax free state efile After Publication 463 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Turbotax free state efile Certain provisions of this new law may reduce your taxes for 2001. Turbotax free state efile The new law contains the following provisions. Turbotax free state efile A new depreciation deduction, the special depreciation allowance. Turbotax free state efile An increase in the limit on depreciation for any car for which you claim the new special depreciation allowance. Turbotax free state efile If you have already filed your 2001 return, you may wish to file an amended return to claim any of these benefits. Turbotax free state efile See Amended Return, later. Turbotax free state efile Depreciation of Car If you used the actual car expense method to figure your deduction for a car you own and use in your business (or as an employee), you generally can claim a depreciation deduction. Turbotax free state efile However, there is a limit on the depreciation deduction you can take for your car each year. Turbotax free state efile See Depreciation Limit later. Turbotax free state efile Special Depreciation Allowance The new law allows you to claim a special depreciation allowance. Turbotax free state efile This special allowance is a deduction equal to 30% of the depreciable basis of qualified property. Turbotax free state efile You figure the amount of the special depreciation allowance after any section 179 deduction you choose to claim, but before figuring your regular depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS). Turbotax free state efile See Depreciation Deduction under Actual Car Expenses in chapter 4 of Publication 463 for information about MACRS. Turbotax free state efile You can claim the special depreciation allowance only for the year the qualified property is placed in service. Turbotax free state efile Qualified property. Turbotax free state efile   Qualified property includes a car (any four-wheeled vehicle, including a truck or van not more than 6,000 pounds, that is made primarily for use on public streets, roads, and highways) that meets all of the following requirements. Turbotax free state efile You bought it new. Turbotax free state efile You bought it after September 10, 2001. Turbotax free state efile (But a car is not qualified property if a binding written contract for you to buy the car was in effect before September 11, 2001. Turbotax free state efile ) You began using it for business after September 10, 2001, and used it more than 50% in a qualified business use. Turbotax free state efile Example. Turbotax free state efile Bob bought a new car on October 15, 2001, for $20,000 and placed it in service immediately, using it 75% for business. Turbotax free state efile Bob's car is qualified property. Turbotax free state efile Bob chooses not to take a section 179 deduction for the car. Turbotax free state efile He does claim the new special depreciation allowance. Turbotax free state efile Bob first must figure the car's depreciable basis, which is $15,000 ($20,000 × . Turbotax free state efile 75). Turbotax free state efile He then figures the special depreciation allowance of $4,500 ($15,000 × . Turbotax free state efile 30). Turbotax free state efile The remaining depreciable basis of $10,500 ($15,000 - $4,500) is depreciated using MACRS (200% declining balance method, half-year convention) and results in a deduction of $2,100 ($10,500 × . Turbotax free state efile 20), for a total depreciation deduction for 2001 of $6,600 ($4,500 + $2,100). Turbotax free state efile However, Bob's depreciation deduction is limited to $5,745 ($7,660 × . Turbotax free state efile 75), as discussed next. Turbotax free state efile Depreciation Limit The limit on your depreciation deduction for 2001 is increased to $7,660 for a car that is qualified property (defined above) and for which you claim the special depreciation allowance. Turbotax free state efile The limit is increased to $23,080 if the car is an electric car. Turbotax free state efile The section 179 deduction is treated as depreciation for purposes of this limit. Turbotax free state efile If you use a car less than 100% in your business or work, the limit is $7,660 (or $23,080 for an electric car) multiplied by the percentage of business and investment use during the year. Turbotax free state efile For cars that do not qualify for (or for which you choose not to claim) the special depreciation allowance, the limit remains $3,060 ($9,280 for electric cars). Turbotax free state efile Amended Return If you filed your 2001 calendar year return before June 1, 2002, and did not claim the new special depreciation allowance for a qualified car, you can claim it by filing an amended return on Form 1040X, Amended U. Turbotax free state efile S. Turbotax free state efile Individual Income Tax Return, by April 15, 2003. Turbotax free state efile At the top of the Form 1040X, print “Filed pursuant to Revenue Procedure 2002–33. Turbotax free state efile ” If you are an employee, attach Form 2106, Employee Business Expenses (revised March 2002). Turbotax free state efile If you are self-employed, attach Form 4562, Depreciation and Amortization (revised March 2002). Turbotax free state efile Or, you can claim the special depreciation allowance by filing Form 3115, Application for Change in Accounting Method, with your 2002 return. Turbotax free state efile For details, see Revenue Procedure 2002–33. Turbotax free state efile (But, filing Form 1040X for 2001 enables you to claim the special allowance earlier than attaching Form 3115 to your 2002 return. Turbotax free state efile ) You cannot claim the special depreciation allowance on an amended return (or by using Form 3115) if you made, or are treated as having made, the election not to claim it described later. Turbotax free state efile Example. Turbotax free state efile The facts are the same as in the previous example except that Bob filed his original 2001 income tax return on April 15, 2002, and claimed a $3,000 ($20,000 x . Turbotax free state efile 75 x . Turbotax free state efile 20) depreciation deduction for his new car using MACRS. Turbotax free state efile Bob now wishes to claim the special depreciation allowance for his new car on an amended 2001 return. Turbotax free state efile Bob, who is an employee, files Form 1040X, by April 15, 2003, with an updated Form 2106 (revised March 2002) attached, increasing his total depreciation deduction to $5,745, as figured in the earlier example. Turbotax free state efile Bob's new filled-in Form 2106 is shown later. Turbotax free state efile Election Not To Claim Special Allowance You can elect not to claim the special depreciation allowance for a car by making a statement attached to, or written on, your return indicating that you are electing not to claim the special depreciation allowance for 5-year property. Turbotax free state efile As a general rule, you must make this election by the due date (including extensions) of your return. Turbotax free state efile You can have an automatic extension of 6 months from the due date of your return (excluding extensions) to make the election with an amended return. Turbotax free state efile To get this extension, you must have filed your original return by the due date (including extensions). Turbotax free state efile At the top of the statement, print “Filed pursuant to section 301. Turbotax free state efile 9100–2. Turbotax free state efile ” If you elect not to claim the special depreciation allowance for a car, you cannot claim it for any other 5-year property placed in service during the same year. Turbotax free state efile Unless you elect (or are treated as electing) not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Turbotax free state efile Deemed election for return filed before June 1, 2002. Turbotax free state efile   If you did not make the election not to claim the special depreciation allowance in the time and manner described above, you will still be treated as electing not to claim it if all of the following apply. Turbotax free state efile You filed your 2001 return before June 1, 2002. Turbotax free state efile You claimed depreciation on your return but did not claim the special depreciation allowance. Turbotax free state efile You did not file an amended 2001 return by April 15, 2003, or a Form 3115 with your 2002 return, to claim the special depreciation allowance. Turbotax free state efile Form 2106, Page 1, for Bob Smith Form 2106, Page 2, for Bob Smith Prev  Up  Next   Home   More Online Publications