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1040 Ez Form

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1040 Ez Form

1040 ez form 6. 1040 ez form   Tax Treaty Benefits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Purpose of Tax Treaties Common Benefits Competent Authority AssistanceAdditional filing. 1040 ez form Obtaining Copies of Tax Treaties Topics - This chapter discusses: Some common tax treaty benefits, How to get help in certain situations, and How to get copies of tax treaties. 1040 ez form Useful Items - You may want to see: Publication 597 Information on the United States—Canada Income Tax Treaty 901 U. 1040 ez form S. 1040 ez form Tax Treaties See chapter 7 for information about getting these publications. 1040 ez form Purpose of Tax Treaties The United States has tax treaties or conventions with many countries. 1040 ez form See Table 6-1 at the end of this chapter for a list of these countries. 1040 ez form Under these treaties and conventions, citizens and residents of the United States who are subject to taxes imposed by the foreign countries are entitled to certain credits, deductions, exemptions, and reductions in the rate of taxes of those foreign countries. 1040 ez form If a foreign country with which the United States has a treaty imposes a tax on you, you may be entitled to benefits under the treaty. 1040 ez form Treaty benefits generally are available to residents of the United States. 1040 ez form They generally are not available to U. 1040 ez form S. 1040 ez form citizens who do not reside in the United States. 1040 ez form However, certain treaty benefits and safeguards, such as the nondiscrimination provisions, are available to U. 1040 ez form S. 1040 ez form citizens residing in the treaty countries. 1040 ez form U. 1040 ez form S. 1040 ez form citizens residing in a foreign country also may be entitled to benefits under that country's tax treaties with third countries. 1040 ez form Certification of U. 1040 ez form S. 1040 ez form residency. 1040 ez form   Use Form 8802, Application for United States Residency Certification, to request certification of U. 1040 ez form S. 1040 ez form residency for purposes of claiming benefits under a tax treaty. 1040 ez form Certification can be requested for the current and any prior calendar years. 1040 ez form You should examine the specific treaty articles to find if you are entitled to a tax credit, tax exemption, reduced rate of tax, or other treaty benefit or safeguard. 1040 ez form Common Benefits Some common tax treaty benefits are explained below. 1040 ez form The credits, deductions, exemptions, reductions in rate, and other benefits provided by tax treaties are subject to conditions and various restrictions. 1040 ez form Benefits provided by certain treaties are not provided by others. 1040 ez form Personal service income. 1040 ez form If you are a U. 1040 ez form S. 1040 ez form resident who is in a treaty country for a limited number of days in the tax year and you meet certain other requirements, the payment you receive for personal services performed in that country may be exempt from that country's income tax. 1040 ez form Professors and teachers. 1040 ez form If you are a U. 1040 ez form S. 1040 ez form resident, the payment you receive for the first 2 or 3 years that you are teaching or doing research in a treaty country may be exempt from that country's income tax. 1040 ez form Students, trainees, and apprentices. 1040 ez form If you are a U. 1040 ez form S. 1040 ez form resident, amounts you receive from the United States for study, research, or business, professional and technical training may be exempt from a treaty country's income tax. 1040 ez form Some treaties exempt grants, allowances, and awards received from governmental and certain nonprofit organizations. 1040 ez form Also, under certain circumstances, a limited amount of pay received by students, trainees, and apprentices may be exempt from the income tax of many treaty countries. 1040 ez form Pensions and annuities. 1040 ez form If you are a U. 1040 ez form S. 1040 ez form resident, nongovernment pensions and annuities you receive may be exempt from the income tax of treaty countries. 1040 ez form Most treaties contain separate provisions for exempting government pensions and annuities from treaty country income tax, and some treaties provide exemption from the treaty country's income tax for social security payments. 1040 ez form Investment income. 1040 ez form If you are a U. 1040 ez form S. 1040 ez form resident, investment income, such as interest and dividends, that you receive from sources in a treaty country may be exempt from that country's income tax or taxed at a reduced rate. 1040 ez form Several treaties provide exemption for capital gains (other than from sales of real property in most cases) if specified requirements are met. 1040 ez form Tax credit provisions. 1040 ez form If you are a U. 1040 ez form S. 1040 ez form resident who receives income from or owns capital in a foreign country, you may be taxed on that income or capital by both the United States and the treaty country. 1040 ez form Most treaties allow you to take a credit against or deduction from the treaty country's taxes based on the U. 1040 ez form S. 1040 ez form tax on the income. 1040 ez form Nondiscrimination provisions. 1040 ez form Most U. 1040 ez form S. 1040 ez form tax treaties provide that the treaty country cannot discriminate by imposing more burdensome taxes on U. 1040 ez form S. 1040 ez form citizens who are residents of the treaty country than it imposes on its own citizens in the same circumstances. 1040 ez form Saving clauses. 1040 ez form U. 1040 ez form S. 1040 ez form treaties contain saving clauses that provide that the treaties do not affect the U. 1040 ez form S. 1040 ez form taxation of its own citizens and residents. 1040 ez form As a result, U. 1040 ez form S. 1040 ez form citizens and residents generally cannot use the treaty to reduce their U. 1040 ez form S. 1040 ez form tax liability. 1040 ez form However, most treaties provide exceptions to saving clauses that allow certain provisions of the treaty to be claimed by U. 1040 ez form S. 1040 ez form citizens or residents. 1040 ez form It is important that you examine the applicable saving clause to determine if an exception applies. 1040 ez form More information on treaties. 1040 ez form   Publication 901 contains an explanation of treaty provisions that apply to amounts received by teachers, students, workers, and government employees and pensioners who are alien nonresidents or residents of the United States. 1040 ez form Since treaty provisions generally are reciprocal, you usually can substitute “United States” for the name of the treaty country whenever it appears, and vice versa when “U. 1040 ez form S. 1040 ez form ” appears in the treaty exemption discussions in Publication 901. 1040 ez form   Publication 597 contains an explanation of a number of frequently-used provisions of the United States–Canada income tax treaty. 1040 ez form Competent Authority Assistance If you are a U. 1040 ez form S. 1040 ez form citizen or resident alien, you can request assistance from the U. 1040 ez form S. 1040 ez form competent authority if you think that the actions of the United States, a treaty country, or both, cause or will cause a tax situation not intended by the treaty between the two countries. 1040 ez form You should read any treaty articles, including the mutual agreement procedure article, that apply in your situation. 1040 ez form The U. 1040 ez form S. 1040 ez form competent authority cannot consider requests involving countries with which the United States does not have a tax treaty. 1040 ez form Effect of request for assistance. 1040 ez form   If your request provides a basis for competent authority assistance, the U. 1040 ez form S. 1040 ez form competent authority generally will consult with the treaty country competent authority on how to resolve the situation. 1040 ez form How to make your request. 1040 ez form   It is important that you make your request for competent authority consideration as soon as either of the following occurs. 1040 ez form You are denied treaty benefits. 1040 ez form Actions taken by both the United States and the foreign country result in double taxation or will result in taxation not intended by the treaty. 1040 ez form   In addition to making a request for assistance, you should take steps so that any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. 1040 ez form Some of the steps you should consider taking include the following. 1040 ez form Filing a protective claim for credit or refund of U. 1040 ez form S. 1040 ez form taxes. 1040 ez form Delaying the expiration of any period of limitations on the making of a refund or other tax adjustment. 1040 ez form Avoiding the lapse or termination of your right to appeal any tax determination. 1040 ez form Complying with all applicable procedures for invoking competent authority consideration. 1040 ez form Contesting an adjustment or seeking an appropriate correlative adjustment with respect to the U. 1040 ez form S. 1040 ez form or treaty country tax. 1040 ez form Taxpayers can consult with the U. 1040 ez form S. 1040 ez form competent authority to determine whether they need to take protective steps and when any required steps need to be taken. 1040 ez form   The request should contain all essential items of information, including the following items. 1040 ez form A reference to the treaty and the treaty provisions on which the request is based. 1040 ez form The years and amounts involved in both U. 1040 ez form S. 1040 ez form dollars and foreign currency. 1040 ez form A brief description of the issues for which competent authority assistance is requested. 1040 ez form   A complete listing of the information that must be included with the request can be found in Revenue Procedure 2006-54, or its successor. 1040 ez form Revenue Procedure 2006-54 is available at www. 1040 ez form irs. 1040 ez form gov/irb/2006-49_IRB/ar13. 1040 ez form html. 1040 ez form   Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. 1040 ez form S. 1040 ez form competent authority assistance under tax treaties. 1040 ez form As noted, Revenue Procedure 2006-54 will be superseded by a revenue procedure to be published in the future. 1040 ez form    Your request for competent authority consideration should be addressed to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, NW Routing M4-365 Washington, DC 20224 Attn: TAIT Additional filing. 1040 ez form   In the case of U. 1040 ez form S. 1040 ez form - initiated adjustments, you also must file a copy of the request with the IRS office where your case is pending. 1040 ez form If the request is filed after the matter has been designated for litigation or while a suit contesting your relevant tax liability is pending in a United States court, a copy of the request, with a separate statement attached identifying the court where the suit is pending and the docket number of the action, also must be filed with the: Office of Associate Chief Counsel (International) Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 Additional details on the procedures for requesting competent authority assistance are included in Revenue Procedure 2006-54, or its successor. 1040 ez form Obtaining Copies of Tax Treaties Table 6-1 lists those countries with which the United States has income tax treaties. 1040 ez form This table is updated through October 31, 2013. 1040 ez form You can get complete information about treaty provisions from the taxing authority in the country from which you receive income or from the treaty itself. 1040 ez form You can obtain the text of most U. 1040 ez form S. 1040 ez form treaties at IRS. 1040 ez form gov. 1040 ez form You also can request the text of treaties from the Department of Treasury at the following address. 1040 ez form Department of Treasury Office of Business and Public Liaison Rm. 1040 ez form 3411 1500 Pennsylvania Avenue, NW  Washington, DC 20220 If you have questions about a treaty and you are in the United States, Puerto Rico, or the U. 1040 ez form S. 1040 ez form Virgin Islands, you can call the IRS at 1-800-829-1040. 1040 ez form Table 6–1. 1040 ez form List of Tax Treaties (Updated through October 31, 2013) Country Official Text  Symbol1 General  Effective Date Citation Applicable Treasury Explanations  or Treasury Decision (T. 1040 ez form D. 1040 ez form ) Australia TIAS 10773 Dec. 1040 ez form 1, 1983 1986-2 C. 1040 ez form B. 1040 ez form 220 1986-2 C. 1040 ez form B. 1040 ez form 246 Protocol TIAS Jan. 1040 ez form 1, 2004     Austria TIAS Jan. 1040 ez form 1, 1999     Bangladesh TIAS Jan. 1040 ez form 1, 2007     Barbados TIAS 11090 Jan. 1040 ez form 1, 1984 1991-2 C. 1040 ez form B. 1040 ez form 436 1991-2 C. 1040 ez form B. 1040 ez form 466 Protocol TIAS Jan. 1040 ez form 1, 2005     Belgium TIAS Jan. 1040 ez form 1, 2008     Bulgaria TIAS Jan. 1040 ez form 1, 2009     Canada2 TIAS 11087 Jan. 1040 ez form 1, 1985 1986-2 C. 1040 ez form B. 1040 ez form 258 1987-2 C. 1040 ez form B. 1040 ez form 298 Protocol TIAS Jan. 1040 ez form 1, 2009     China, People's Republic of TIAS 12065 Jan. 1040 ez form 1, 1987 1988-1 C. 1040 ez form B. 1040 ez form 414 1988-1 C. 1040 ez form B. 1040 ez form 447 Commonwealth of Independent States3 TIAS 8225 Jan. 1040 ez form 1, 1976 1976-2 C. 1040 ez form B. 1040 ez form 463 1976-2 C. 1040 ez form B. 1040 ez form 475 Cyprus TIAS 10965 Jan. 1040 ez form 1, 1986 1989-2 C. 1040 ez form B. 1040 ez form 280 1989-2 C. 1040 ez form B. 1040 ez form 314 Czech Republic TIAS Jan. 1040 ez form 1, 1993     Denmark TIAS Jan. 1040 ez form 1, 2001     Protocol TIAS Jan. 1040 ez form 1, 2008     Egypt TIAS 10149 Jan. 1040 ez form 1, 1982 1982-1 C. 1040 ez form B. 1040 ez form 219 1982-1 C. 1040 ez form B. 1040 ez form 243 Estonia TIAS Jan. 1040 ez form 1, 2000     Finland TIAS 12101 Jan. 1040 ez form 1, 1991     Protocol TIAS Jan. 1040 ez form 1, 2008     France TIAS Jan. 1040 ez form 1, 1996     Protocol TIAS Jan. 1040 ez form 1, 2009     Germany TIAS Jan. 1040 ez form 1, 1990     Protocol TIAS Jan. 1040 ez form 1, 2008     Greece TIAS 2902 Jan. 1040 ez form 1, 1953 1958-2 C. 1040 ez form B. 1040 ez form 1054 T. 1040 ez form D. 1040 ez form 6109, 1954-2 C. 1040 ez form B. 1040 ez form 638 Hungary TIAS 9560 Jan. 1040 ez form 1, 1980 1980-1 C. 1040 ez form B. 1040 ez form 333 1980-1 C. 1040 ez form B. 1040 ez form 354 Iceland TIAS 8151 Jan. 1040 ez form 1, 2009     India TIAS Jan. 1040 ez form 1, 1991     Indonesia TIAS 11593 Jan. 1040 ez form 1, 1990     Ireland TIAS Jan. 1040 ez form 1, 1998     Israel TIAS Jan. 1040 ez form 1, 1995     Italy TIAS Jan. 1040 ez form 1, 2010     Jamaica TIAS 10207 Jan. 1040 ez form 1, 1982 1982-1 C. 1040 ez form B. 1040 ez form 257 1982-1 C. 1040 ez form B. 1040 ez form 291 Japan TIAS Jan. 1040 ez form 1, 2005     Kazakhstan TIAS Jan. 1040 ez form 1, 1996     Korea, South TIAS 9506 Jan. 1040 ez form 1, 1980 1979-2 C. 1040 ez form B. 1040 ez form 435 1979-2 C. 1040 ez form B. 1040 ez form 458 Latvia TIAS Jan. 1040 ez form 1, 2000     Lithuania TIAS Jan. 1040 ez form 1, 2000     Luxembourg TIAS Jan. 1040 ez form 1, 2001     Malta TIAS Jan. 1040 ez form 1, 2011     Mexico TIAS Jan. 1040 ez form 1,1994     Protocol TIAS Jan. 1040 ez form 1, 2004               Table 6–1 (continued). 1040 ez form Country Official Text  Symbol1 General  Effective Date Citation Applicable Treasury Explanations  or Treasury Decision (T. 1040 ez form D. 1040 ez form ) Morocco TIAS 10195 Jan. 1040 ez form 1, 1981 1982-2 C. 1040 ez form B. 1040 ez form 405 1982-2 C. 1040 ez form B. 1040 ez form 427 Netherlands TIAS Jan. 1040 ez form 1, 1994     Protocol TIAS Jan. 1040 ez form 1, 2005     New Zealand TIAS 10772 Nov. 1040 ez form 2, 1983 1990-2 C. 1040 ez form B. 1040 ez form 274 1990-2 C. 1040 ez form B. 1040 ez form 303 Protocol TIAS Jan. 1040 ez form 1, 2011     Norway TIAS 7474 Jan. 1040 ez form 1, 1971 1973-1 C. 1040 ez form B. 1040 ez form 669 1973-1 C. 1040 ez form B. 1040 ez form 693 Protocol TIAS 10205 Jan. 1040 ez form 1, 1982 1982-2 C. 1040 ez form B. 1040 ez form 440 1982-2 C. 1040 ez form B. 1040 ez form 454 Pakistan TIAS 4232 Jan. 1040 ez form 1, 1959 1960-2 C. 1040 ez form B. 1040 ez form 646 T. 1040 ez form D. 1040 ez form 6431, 1960-1 C. 1040 ez form B. 1040 ez form 755 Philippines TIAS 10417 Jan. 1040 ez form 1, 1983 1984-2 C. 1040 ez form B. 1040 ez form 384 1984-2 C. 1040 ez form B. 1040 ez form 412 Poland TIAS 8486 Jan. 1040 ez form 1, 1974 1977-1 C. 1040 ez form B. 1040 ez form 416 1977-1 C. 1040 ez form B. 1040 ez form 427 Portugal TIAS Jan. 1040 ez form 1, 1996     Romania TIAS 8228 Jan. 1040 ez form 1, 1974 1976-2 C. 1040 ez form B. 1040 ez form 492 1976-2 C. 1040 ez form B. 1040 ez form 504 Russia TIAS Jan. 1040 ez form 1, 1994     Slovak Republic TIAS Jan. 1040 ez form 1, 1993     Slovenia TIAS Jan. 1040 ez form 1, 2002     South Africa TIAS Jan. 1040 ez form 1, 1998     Spain TIAS Jan. 1040 ez form 1, 1991     Sri Lanka TIAS Jan. 1040 ez form 1, 2004     Sweden TIAS Jan. 1040 ez form 1, 1996     Protocol TIAS Jan. 1040 ez form 1, 2007     Switzerland TIAS Jan. 1040 ez form 1, 1998     Thailand TIAS Jan. 1040 ez form 1, 1998     Trinidad and Tobago TIAS 7047 Jan. 1040 ez form 1, 1970 1971-2 C. 1040 ez form B. 1040 ez form 479   Tunisia TIAS Jan. 1040 ez form 1, 1990     Turkey TIAS Jan. 1040 ez form 1, 1998     Ukraine TIAS Jan. 1040 ez form 1, 2001     United Kingdom TIAS Jan. 1040 ez form 1, 2004     Venezuela TIAS Jan. 1040 ez form 1, 2000      1(TIAS) — Treaties and Other International Act Series. 1040 ez form  2Information on the treaty can be found in Publication 597, Information on the United States—Canada Income Tax Treaty. 1040 ez form 3The U. 1040 ez form S. 1040 ez form -U. 1040 ez form S. 1040 ez form S. 1040 ez form R. 1040 ez form income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. 1040 ez form Prev  Up  Next   Home   More Online Publications
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A-Z Index of Consumer Organizations

The 1040 Ez Form

1040 ez form 6. 1040 ez form   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. 1040 ez form However, to determine these costs, you must value your inventory at the beginning and end of each tax year. 1040 ez form 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. 1040 ez form This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. 1040 ez form 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. 1040 ez form If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. 1040 ez form For more information, see chapter 2. 1040 ez form 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. 1040 ez form These lines are reproduced below and are explained in the discussion that follows. 1040 ez form 35 Inventory at beginning of year. 1040 ez form If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. 1040 ez form 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. 1040 ez form Subtract line 41 from line 40. 1040 ez form  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. 1040 ez form 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). 1040 ez form Opening inventory usually will be identical to the closing inventory of the year before. 1040 ez form You must explain any difference in a schedule attached to your return. 1040 ez form Donation of inventory. 1040 ez form   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. 1040 ez form 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. 1040 ez form You must remove the amount of your contribution deduction from your opening inventory. 1040 ez form It is not part of the cost of goods sold. 1040 ez form   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. 1040 ez form Treat the inventory's cost as you would ordinarily treat it under your method of accounting. 1040 ez form For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. 1040 ez form   A special rule may apply to certain donations of food inventory. 1040 ez form See Publication 526, Charitable Contributions. 1040 ez form Example 1. 1040 ez form You are a calendar year taxpayer who uses an accrual method of accounting. 1040 ez form In 2013, you contributed property from inventory to a church. 1040 ez form It had a fair market value of $600. 1040 ez form 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. 1040 ez form The charitable contribution allowed for 2013 is $400 ($600 − $200). 1040 ez form 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. 1040 ez form The cost of goods sold you use in determining gross income for 2013 must not include the $400. 1040 ez form You remove that amount from opening inventory for 2013. 1040 ez form Example 2. 1040 ez form 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. 1040 ez form You would not be allowed any charitable contribution deduction for the contributed property. 1040 ez form 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. 1040 ez form If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. 1040 ez form Trade discounts. 1040 ez form   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. 1040 ez form You must use the prices you pay (not the stated prices) in figuring your cost of purchases. 1040 ez form Do not show the discount amount separately as an item in gross income. 1040 ez form   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. 1040 ez form Cash discounts. 1040 ez form   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. 1040 ez form There are two methods of accounting for cash discounts. 1040 ez form You can either credit them to a separate discount account or deduct them from total purchases for the year. 1040 ez form Whichever method you use, you must be consistent. 1040 ez form If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. 1040 ez form For more information, see Change in Accounting Method in chapter 2. 1040 ez form   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. 1040 ez form If you use this method, do not reduce your cost of goods sold by the cash discounts. 1040 ez form Purchase returns and allowances. 1040 ez form   You must deduct all returns and allowances from your total purchases during the year. 1040 ez form Merchandise withdrawn from sale. 1040 ez form   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. 1040 ez form Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. 1040 ez form You must also charge the amount to your drawing account. 1040 ez form   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. 1040 ez form As stated above, you also use it to record withdrawals of merchandise for personal or family use. 1040 ez form This account is also known as a “withdrawals account” or “personal account. 1040 ez form ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. 1040 ez form Small merchandisers (wholesalers, retailers, etc. 1040 ez form ) usually do not have labor costs that can properly be charged to cost of goods sold. 1040 ez form 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. 1040 ez form Direct labor. 1040 ez form   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. 1040 ez form 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. 1040 ez form Indirect labor. 1040 ez form   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. 1040 ez form Other labor. 1040 ez form   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. 1040 ez form 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. 1040 ez form Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. 1040 ez form Those that are not used in the manufacturing process are treated as deferred charges. 1040 ez form You deduct them as a business expense when you use them. 1040 ez form Business expenses are discussed in chapter 8. 1040 ez form 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. 1040 ez form Containers. 1040 ez form   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. 1040 ez form If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. 1040 ez form Freight-in. 1040 ez form   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. 1040 ez form Overhead expenses. 1040 ez form   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. 1040 ez form The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. 1040 ez form 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. 1040 ez form 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. 1040 ez form Inventory at the end of the year is also known as closing or ending inventory. 1040 ez form Your ending inventory will usually become the beginning inventory of your next tax year. 1040 ez form 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. 1040 ez form Prev  Up  Next   Home   More Online Publications