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1040 ez Publication 561 - Introductory Material Table of Contents IntroductionOrdering forms and publications. 1040 ez Tax questions. 1040 ez Useful Items - You may want to see: Introduction This publication is designed to help donors and appraisers determine the value of property (other than cash) that is given to qualified organizations. 1040 ez It also explains what kind of information you must have to support the charitable contribution deduction you claim on your return. 1040 ez This publication does not discuss how to figure the amount of your deduction for charitable contributions or written records and substantiation required. 1040 ez See Publication 526, Charitable Contributions, for this information. 1040 ez Comments and suggestions. 1040 ez We welcome your comments about this publication and your suggestions for future editions. 1040 ez You can write to us at the following address: Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. 1040 ez NW, IR-6406 Washington, DC 20224 We respond to many letters by telephone. 1040 ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040 ez You can email us at *taxforms@irs. 1040 ez gov. 1040 ez (The asterisk must be included in the address. 1040 ez ) Please put “Publications Comment” on the subject line. 1040 ez Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. 1040 ez Ordering forms and publications. 1040 ez Visit www. 1040 ez irs. 1040 ez gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 business days after your request is received. 1040 ez National Distribution Center P. 1040 ez O. 1040 ez Box 8903 Bloomington, IL 61702-8903 Tax questions. 1040 ez If you have a tax question, visit www. 1040 ez irs. 1040 ez gov or call 1-800-829-1040. 1040 ez We cannot answer tax questions sent to either of the above addresses. 1040 ez Useful Items - You may want to see: Publication 526 Charitable Contributions Form (and Instructions) 8282Donee Information Return 8283Noncash Charitable Contributions 8283-VPayment Voucher for Filing Fee Under Section 170(f)(13) See How To Get Tax Help, near the end of this publication, for information about getting these publications and forms. 1040 ez Prev Up Next Home More Online Publications
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The 1040 Ez
1040 ez 5. 1040 ez 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. 1040 ez Making the election. 1040 ez Form 3115. 1040 ez Income TaxesAccrual of contested income taxes. 1040 ez Employment Taxes Other TaxesAdditional Medicare Tax. 1040 ez What's New Additional Medicare Tax. 1040 ez Beginning in 2013, you must withhold a 0. 1040 ez 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 1040 ez Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. 1040 ez See Employment Taxes , and Self-employment tax , later. 1040 ez Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. 1040 ez You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. 1040 ez 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. 1040 ez When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. 1040 ez This applies whether you use the cash method or an accrual method of accounting. 1040 ez 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. 1040 ez You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . 1040 ez Limit on accrual of taxes. 1040 ez A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. 1040 ez 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. 1040 ez Example. 1040 ez Your state imposes a tax on personal property used in a trade or business conducted in the state. 1040 ez This tax is assessed and becomes a lien as of July 1 (accrual date). 1040 ez In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. 1040 ez Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. 1040 ez You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. 1040 ez Uniform capitalization rules. 1040 ez 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. 1040 ez They also apply to certain taxpayers who acquire property for resale. 1040 ez Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. 1040 ez For more information, see chapter 1. 1040 ez Carrying charges. 1040 ez Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. 1040 ez You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. 1040 ez For more information, see chapter 7. 1040 ez Refunds of taxes. 1040 ez 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. 1040 ez For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. 1040 ez You must include in income any interest you receive on tax refunds. 1040 ez Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. 1040 ez 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. 1040 ez Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. 1040 ez See Taxes for local benefits , later. 1040 ez If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. 1040 ez However, you can elect to ratably accrue the taxes during the year. 1040 ez See Electing to ratably accrue , later. 1040 ez Taxes for local benefits. 1040 ez Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. 1040 ez These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. 1040 ez You should increase the basis of your property by the amount of the assessment. 1040 ez You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. 1040 ez 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. 1040 ez Example. 1040 ez To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. 1040 ez The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. 1040 ez The city is paying the principal and interest with the annual payments made by the property owners. 1040 ez The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. 1040 ez The part of the payments used to pay the interest charges on the bonds is deductible as taxes. 1040 ez Charges for services. 1040 ez Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. 1040 ez Purchase or sale of real estate. 1040 ez If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. 1040 ez 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. 1040 ez Treat the seller as paying the taxes up to but not including the date of sale. 1040 ez Treat the buyer as paying the taxes beginning with the date of sale. 1040 ez You can usually find this information on the settlement statement you received at closing. 1040 ez 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. 1040 ez Example. 1040 ez Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. 1040 ez He has not elected to ratably accrue property taxes. 1040 ez November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. 1040 ez He sold the property on June 30, 2013. 1040 ez Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. 1040 ez 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. 1040 ez Electing to ratably accrue. 1040 ez If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. 1040 ez Example. 1040 ez Juan Sanchez is a calendar year taxpayer who uses an accrual method. 1040 ez His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. 1040 ez July 1 is the assessment and lien date. 1040 ez 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. 1040 ez Separate elections. 1040 ez You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. 1040 ez Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. 1040 ez See Form 3115 , later. 1040 ez Making the election. 1040 ez 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. 1040 ez The statement should show all the following items. 1040 ez The trades or businesses to which the election applies and the accounting method or methods used. 1040 ez The period to which the taxes relate. 1040 ez The computation of the real estate tax deduction for that first year. 1040 ez Generally, you must file your return by the due date (including extensions). 1040 ez 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). 1040 ez Attach the statement to the amended return and write “Filed pursuant to section 301. 1040 ez 9100-2” on the statement. 1040 ez File the amended return at the same address where you filed the original return. 1040 ez Form 3115. 1040 ez 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. 1040 ez For more information, including applicable time frames for filing, see the Instructions for Form 3115. 1040 ez Note. 1040 ez 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. 1040 ez R. 1040 ez B. 1040 ez 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. 1040 ez R. 1040 ez B. 1040 ez 689, and Revenue Procedure 2012-20, 2012-14 I. 1040 ez R. 1040 ez B. 1040 ez 700, or any successor. 1040 ez Revenue Procedure 2011-14 is available at www. 1040 ez irs. 1040 ez gov/irb/2011-04IRB/ar08. 1040 ez html. 1040 ez Income Taxes This section discusses federal, state, local, and foreign income taxes. 1040 ez Federal income taxes. 1040 ez You cannot deduct federal income taxes. 1040 ez State and local income taxes. 1040 ez A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. 1040 ez An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). 1040 ez 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. 1040 ez Accrual of contested income taxes. 1040 ez 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. 1040 ez 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. 1040 ez You cannot deduct them in the year in which the liability is finally determined. 1040 ez 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. 1040 ez Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. 1040 ez 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. 1040 ez You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. 1040 ez For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. 1040 ez Foreign income taxes. 1040 ez Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. 1040 ez S. 1040 ez possession. 1040 ez However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. 1040 ez S. 1040 ez tax under the foreign earned income exclusion or the foreign housing exclusion. 1040 ez For information on these exclusions, see Publication 54, Tax Guide for U. 1040 ez S. 1040 ez Citizens and Resident Aliens Abroad. 1040 ez For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. 1040 ez Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. 1040 ez 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. 1040 ez You may also need to pay certain employment taxes from your own funds. 1040 ez These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. 1040 ez Note. 1040 ez Additional Medicare Tax is only imposed on the employee. 1040 ez There is no employer share of Additional Medicare Tax. 1040 ez 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. 1040 ez You can deduct the employment taxes you must pay from your own funds as taxes. 1040 ez Example. 1040 ez You pay your employee $18,000 a year. 1040 ez However, after you withhold various taxes, your employee receives $14,500. 1040 ez You also pay an additional $1,500 in employment taxes. 1040 ez You should deduct the full $18,000 as wages. 1040 ez You can deduct the $1,500 you pay from your own funds as taxes. 1040 ez For more information on employment taxes, see Publication 15 (Circular E). 1040 ez Unemployment fund taxes. 1040 ez As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. 1040 ez Deduct these payments as taxes. 1040 ez Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. 1040 ez Excise taxes. 1040 ez Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. 1040 ez However, see Fuel taxes , later. 1040 ez For more information on excise taxes, see Publication 510. 1040 ez Franchise taxes. 1040 ez You can deduct corporate franchise taxes as a business expense. 1040 ez Fuel taxes. 1040 ez 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. 1040 ez Do not deduct these taxes as a separate item. 1040 ez You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. 1040 ez For more information, see Publication 510. 1040 ez Occupational taxes. 1040 ez 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. 1040 ez Personal property tax. 1040 ez You can deduct any tax imposed by a state or local government on personal property used in your trade or business. 1040 ez Sales tax. 1040 ez 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. 1040 ez 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. 1040 ez If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. 1040 ez If the property is depreciable, add the sales tax to the basis for depreciation. 1040 ez For more information on basis, see Publication 551. 1040 ez 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. 1040 ez Also, do not include these taxes in gross receipts or sales. 1040 ez Self-employment tax. 1040 ez You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. 1040 ez This deduction only affects your income tax. 1040 ez It does not affect your net earnings from self-employment or your self-employment tax. 1040 ez 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). 1040 ez For more information on self-employment tax, see Publication 334. 1040 ez Additional Medicare Tax. 1040 ez Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. 1040 ez See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. 1040 ez Prev Up Next Home More Online Publications