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1040a Form

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1040a Form

1040a form 8. 1040a form   Foreign Insurance Taxes Table of Contents Premium. 1040a form Tax is imposed on insurance policies issued by foreign insurers. 1040a form Any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit they are made, signed, issued, or sold, is liable for the tax. 1040a form The following tax rates apply to each dollar (or fraction thereof) of the premium paid. 1040a form Casualty insurance and indemnity, fidelity, and surety bonds: 4 cents. 1040a form For example, on a premium payment of $10. 1040a form 10, the tax is 44 cents. 1040a form Life, sickness, and accident insurance, and annuity contracts: 1 cent. 1040a form For example, on a premium payment of $10. 1040a form 10, the tax is 11 cents. 1040a form Reinsurance policies covering any of the taxable contracts described in items (1) and (2): 1 cent. 1040a form However, the tax does not apply to casualty insurance premiums paid to foreign insurers for coverage of export goods in transit to foreign destinations. 1040a form Premium. 1040a form   Premium means the agreed price or consideration for assuming and carrying the risk or obligation. 1040a form It includes any additional charge or assessment payable under the contract, whether in one sum or installments. 1040a form If premiums are refunded, claim the tax paid on those premiums as an overpayment against tax due on other premiums paid or file a claim for refund. 1040a form When liability attaches. 1040a form   The liability for this tax attaches when the premium payment is transferred to the foreign insurer or reinsurer (including transfers to any bank, trust fund, or similar recipient designated by the foreign insurer or reinsurer) or to any nonresident agent, solicitor, or broker. 1040a form A person can pay the tax before the liability attaches if the person keeps records consistent with that practice. 1040a form Who must file. 1040a form   The person who pays the premium to the foreign insurer (or to any nonresident person such as a foreign broker) must pay the tax and file the return. 1040a form Otherwise, any person who issued or sold the policy, or who is insured under the policy, is required to pay the tax and file the return. 1040a form    The person liable for this tax must keep accurate records that identify each policy or instrument subject to tax. 1040a form These records must clearly establish the type of policy or instrument, the gross premium paid, the identity of the insured and insurer, and the total premium charged. 1040a form If the premium is to be paid in installments, the records must also establish the amount and anniversary date of each installment. 1040a form   The records must be kept at the place of business or other convenient location for at least 3 years after the later of the date any part of the tax became due, or the date any part of the tax was paid. 1040a form During this period, the records must be readily accessible to the IRS. 1040a form   The person having control or possession of a policy or instrument subject to this tax must keep the policy for at least 3 years after the date any part of the tax on it was paid. 1040a form For information on reinsurance premiums paid from one foreign insurer to another foreign insurer, see Rev. 1040a form Rul. 1040a form 2008-15. 1040a form You can find Rev. 1040a form Rul. 1040a form 2008-15 on page 633 of I. 1040a form R. 1040a form B. 1040a form 2008-12 at www. 1040a form irs. 1040a form gov/pub/irs-irbs/irb08-12. 1040a form pdf. 1040a form Treaty-based positions under IRC 6114. 1040a form   You may have to file an annual report disclosing the amount of premiums exempt from United States excise tax as a result of the application of a treaty with the United States that overrides (or otherwise modifies) any provision of the Internal Revenue Code. 1040a form   Attach any disclosure statement to the first quarter Form 720. 1040a form You may be able to use Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), as a disclosure statement. 1040a form See the Instructions for Form 720 for information on how and where to file. 1040a form   See Revenue Procedure 92-14 in Cumulative Bulletin 1992-1 for procedures you can use to claim a refund of this tax under certain U. 1040a form S. 1040a form treaties. 1040a form Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Washington

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*
Bellevue

520 112th Ave. N.E.
Bellevue, WA 98004

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

 

Services Provided

(425) 456-9637
Bellingham

114 W. Magnolia
Bellingham, WA 98225

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

 

Services Provided

(360) 752-4361
Everett

3020 Rucker Ave.
Everett, WA 98201 

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

 

Services Provided

(425) 304-1656
Olympia 

319 7th Avenue SE
Olympia, WA 98501

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

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(360) 570-5410
Richland  825 Jadwin Ave.
Richland, WA 99352 

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

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(509) 376-0705
Seattle 

915 Second Ave.
Seattle, WA 98174 

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

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(206) 220-6015
Silverdale  9657 Levin Rd.
Silverdale, WA 98383 

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

 

Services Provided

(360) 698-5861
Spokane 

920 W. Riverside 
Spokane, WA 99201 

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

                                                                                                 
Services Provided

(509) 353-0508

Tacoma 

1201 Pacific Ave.
Tacoma, WA 98402 

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

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(253) 428-3518

Vancouver 

500 W. 12th St.
Vancouver, WA 98660 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:45 p.m. - 1:45 p.m.)

 

Services Provided

(360) 905-1181
Yakima 

107 S. 7th Ave.
Yakima, WA 98902 

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

 

Services Provided

(509) 454-5675

* 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 206-220-6037 in the Seattle 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
915 Second Avenue, MS W180
Seattle, WA 98174-0041

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 1040a Form

1040a form 5. 1040a form   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. 1040a form Short-term lease. 1040a form Retail space. 1040a form Qualified long-term real property. 1040a form Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. 1040a form If there is a connection between any income you receive and your business, the income is business income. 1040a form A connection exists if it is clear that the payment of income would not have been made if you did not have the business. 1040a form You can have business income even if you are not involved in the activity on a regular full-time basis. 1040a form Income from work you do on the side in addition to your regular job can be business income. 1040a form You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. 1040a form But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. 1040a form For information on selling business assets, see chapter 3. 1040a form Nonemployee compensation. 1040a form Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. 1040a form This includes amounts reported as nonemployee compensation in box 7 of the form. 1040a form You can find more information in the instructions on the back of the Form 1099-MISC you received. 1040a form Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. 1040a form In most cases, your business income will be in the form of cash, checks, and credit card charges. 1040a form But business income can be in other forms, such as property or services. 1040a form These and other types of income are explained next. 1040a form If you are a U. 1040a form S. 1040a form citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. 1040a form S. 1040a form law. 1040a form If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. 1040a form For details, see Publication 54, Tax Guide for U. 1040a form S. 1040a form Citizens and Resident Aliens Abroad. 1040a form Bartering for Property or Services Bartering is an exchange of property or services. 1040a form You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. 1040a form If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. 1040a form Example 1. 1040a form You are a self-employed lawyer. 1040a form You perform legal services for a client, a small corporation. 1040a form In payment for your services, you receive shares of stock in the corporation. 1040a form You must include the fair market value of the shares in income. 1040a form Example 2. 1040a form You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. 1040a form You must include the fair rental value of the apartment in your gross receipts. 1040a form Your landlord must include the fair market value of the work of art in his or her rental income. 1040a form Example 3. 1040a form You are a self-employed accountant. 1040a form Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. 1040a form Members get in touch with other members directly and bargain for the value of the services to be performed. 1040a form In return for accounting services you provided for the house painter's business, the house painter painted your home. 1040a form You must include in gross receipts the fair market value of the services you received from the house painter. 1040a form The house painter must include the fair market value of your accounting services in his or her gross receipts. 1040a form Example 4. 1040a form You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. 1040a form As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. 1040a form You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. 1040a form The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. 1040a form It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. 1040a form See Publication 15 (Circular E), Employer's Tax Guide. 1040a form Example 5. 1040a form You operate a plumbing business and use the cash method of accounting. 1040a form You join a barter club and agree to provide plumbing services to any member for a specified number of hours. 1040a form Each member has access to a directory that lists the members of the club and the services available. 1040a form Members contact each other directly and request services to be performed. 1040a form You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. 1040a form You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. 1040a form Information returns. 1040a form   If you are involved in a bartering transaction, you may have to file either of the following forms. 1040a form Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. 1040a form Form 1099-MISC, Miscellaneous Income. 1040a form For information about these forms, see the General Instructions for Certain Information Returns. 1040a form Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. 1040a form , who provides services (maid services, etc. 1040a form ) for guests, report the rental income and expenses on Schedule C or C-EZ. 1040a form If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. 1040a form For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). 1040a form Real estate dealer. 1040a form   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. 1040a form Rent you receive from real estate held for sale to customers is subject to SE tax. 1040a form However, rent you receive from real estate held for speculation or investment is not subject to SE tax. 1040a form Trailer park owner. 1040a form   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. 1040a form    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. 1040a form Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. 1040a form   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. 1040a form   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. 1040a form Hotels, boarding houses, and apartments. 1040a form   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. 1040a form   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. 1040a form An example of a service that is not normally provided for the convenience of the occupants is maid service. 1040a form However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. 1040a form Prepaid rent. 1040a form   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. 1040a form This is true no matter what accounting method or period you use. 1040a form Lease bonus. 1040a form   A bonus you receive from a lessee for granting a lease is an addition to the rent. 1040a form Include it in your gross receipts in the year received. 1040a form Lease cancellation payments. 1040a form   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. 1040a form Payments to third parties. 1040a form   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. 1040a form A common example of this kind of income is a lessee's payment of your property taxes on leased real property. 1040a form Settlement payments. 1040a form   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. 1040a form Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. 1040a form ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. 1040a form Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. 1040a form If you receive any of those payments, include them in your gross receipts as explained in that discussion. 1040a form Interest and Dividend Income Interest and dividends may be considered business income. 1040a form Interest. 1040a form   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. 1040a form Interest received on loans is business income if you are in the business of lending money. 1040a form Uncollectible loans. 1040a form   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. 1040a form If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. 1040a form See Bad Debts in chapter 8. 1040a form Unstated interest. 1040a form   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. 1040a form See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. 1040a form Dividends. 1040a form   Generally, dividends are business income to dealers in securities. 1040a form For most sole proprietors and statutory employees, however, dividends are nonbusiness income. 1040a form If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. 1040a form   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. 1040a form To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. 1040a form Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. 1040a form General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. 1040a form Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. 1040a form If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. 1040a form Exceptions The following discussion covers some exceptions to the general rule for canceled debt. 1040a form Price reduced after purchase. 1040a form   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. 1040a form Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. 1040a form Deductible debt. 1040a form   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. 1040a form Example. 1040a form You get accounting services for your business on credit. 1040a form Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. 1040a form Your accountant forgives part of the amount you owe for the accounting services. 1040a form How you treat the canceled debt depends on your method of accounting. 1040a form Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. 1040a form Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. 1040a form   For information on the cash and accrual methods of accounting, see chapter 2. 1040a form Exclusions Do not include canceled debt in income in the following situations. 1040a form However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. 1040a form For more information, see Form 982. 1040a form The cancellation takes place in a bankruptcy case under title 11 of the U. 1040a form S. 1040a form Code (relating to bankruptcy). 1040a form See Publication 908, Bankruptcy Tax Guide. 1040a form The cancellation takes place when you are insolvent. 1040a form You can exclude the canceled debt to the extent you are insolvent. 1040a form See Publication 908. 1040a form The canceled debt is a qualified farm debt owed to a qualified person. 1040a form See chapter 3 in Publication 225, Farmer's Tax Guide. 1040a form The canceled debt is a qualified real property business debt. 1040a form This situation is explained later. 1040a form The canceled debt is qualified principal residence indebtedness which is discharged after 2006. 1040a form See Form 982. 1040a form If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. 1040a form If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. 1040a form Debt. 1040a form   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. 1040a form Qualified real property business debt. 1040a form   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. 1040a form If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. 1040a form Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. 1040a form However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. 1040a form Cancellation of qualified real property business debt. 1040a form   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. 1040a form It was incurred or assumed in connection with real property used in a trade or business. 1040a form It was secured by such real property. 1040a form It was incurred or assumed at either of the following times. 1040a form Before January 1, 1993. 1040a form After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. 1040a form It is debt to which you choose to apply these rules. 1040a form   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. 1040a form   You cannot exclude more than either of the following amounts. 1040a form The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. 1040a form The total adjusted bases of depreciable real property held by you immediately before the cancellation. 1040a form These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. 1040a form Do not take into account depreciable real property acquired in contemplation of the cancellation. 1040a form Election. 1040a form   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. 1040a form You must file your return by the due date (including extensions). 1040a form If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040a form For more information, see When To File in the form instructions. 1040a form Other Income The following discussion explains how to treat other types of business income you may receive. 1040a form Restricted property. 1040a form   Restricted property is property that has certain restrictions that affect its value. 1040a form If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. 1040a form However, you can choose to be taxed in the year you receive the property. 1040a form For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. 1040a form Gains and losses. 1040a form   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. 1040a form Instead, you must report these gains and losses on other forms. 1040a form For more information, see chapter 3. 1040a form Promissory notes. 1040a form   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. 1040a form In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. 1040a form Lost income payments. 1040a form   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. 1040a form Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. 1040a form Damages. 1040a form   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. 1040a form Patent infringement. 1040a form Breach of contract or fiduciary duty. 1040a form Antitrust injury. 1040a form Economic injury. 1040a form   You may be entitled to a deduction against the income if it compensates you for actual economic injury. 1040a form Your deduction is the smaller of the following amounts. 1040a form The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. 1040a form Your loss from the injury that you have not yet deducted. 1040a form Punitive damages. 1040a form   You must also include punitive damages in income. 1040a form Kickbacks. 1040a form   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. 1040a form However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. 1040a form Recovery of items previously deducted. 1040a form   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. 1040a form However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. 1040a form If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. 1040a form Example. 1040a form Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. 1040a form He also had 2 personal exemptions for a total of $7,800. 1040a form He would not pay income tax even if he did not deduct the bad debt. 1040a form Therefore, he will not report as income any part of the $300 he may recover in any future year. 1040a form Exception for depreciation. 1040a form   This rule does not apply to depreciation. 1040a form You recover depreciation using the rules explained next. 1040a form Recapture of depreciation. 1040a form   In the following situations, you have to recapture the depreciation deduction. 1040a form This means you include in income part or all of the depreciation you deducted in previous years. 1040a form Listed property. 1040a form   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. 1040a form You do this by including in income on Schedule C part of the depreciation you deducted in previous years. 1040a form Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. 1040a form For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. 1040a form That chapter explains how to determine whether property is used more than 50% in your business. 1040a form Section 179 property. 1040a form   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. 1040a form You do this by including in income on Schedule C part of the deduction you took. 1040a form Use Part IV of Form 4797 to figure the amount to include on Schedule C. 1040a form See chapter 2 in Publication 946 to find out when you recapture the deduction. 1040a form Sale or exchange of depreciable property. 1040a form   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. 1040a form You figure the income due to depreciation recapture in Part III of Form 4797. 1040a form For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. 1040a form Items That Are Not Income In some cases the property or money you receive is not income. 1040a form Appreciation. 1040a form   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. 1040a form Consignments. 1040a form   Consignments of merchandise to others to sell for you are not sales. 1040a form The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. 1040a form Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. 1040a form Merchandise you have shipped out on consignment is included in your inventory until it is sold. 1040a form   Do not include merchandise you receive on consignment in your inventory. 1040a form Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. 1040a form Construction allowances. 1040a form   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. 1040a form Under a short-term lease of retail space. 1040a form For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. 1040a form Amount you can exclude. 1040a form   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. 1040a form Short-term lease. 1040a form   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. 1040a form The following rules apply in determining whether the lease is for 15 years or less. 1040a form Take into account options to renew when figuring whether the lease is for 15 years or less. 1040a form But do not take into account any option to renew at fair market value determined at the time of renewal. 1040a form Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. 1040a form Retail space. 1040a form   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. 1040a form Qualified long-term real property. 1040a form   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. 1040a form Exchange of like-kind property. 1040a form   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. 1040a form This means that the gain is not taxable and the loss is not deductible. 1040a form A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. 1040a form For more information, see Form 8824. 1040a form Leasehold improvements. 1040a form   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. 1040a form However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. 1040a form Loans. 1040a form   Money borrowed through a bona fide loan is not income. 1040a form Sales tax. 1040a form   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. 1040a form Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). 1040a form Direct seller. 1040a form   You must report all income you receive as a direct seller on Schedule C or C-EZ. 1040a form This includes any of the following. 1040a form Income from sales—payments you receive from customers for products they buy from you. 1040a form Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. 1040a form Prizes, awards, and gifts you receive from your selling business. 1040a form You must report this income regardless of whether it is reported to you on an information return. 1040a form   You are a direct seller if you meet all the following conditions. 1040a form You are engaged in one of the following trades or businesses. 1040a form Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. 1040a form Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). 1040a form Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. 1040a form Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. 1040a form Executor or administrator. 1040a form   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. 1040a form A nonprofessional fiduciary (personal representative) and both of the following apply. 1040a form The estate includes an active trade or business in which you actively participate. 1040a form Your fees are related to the operation of that trade or business. 1040a form A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. 1040a form    If the fees do not meet the above requirements, report them on line 21 of Form 1040. 1040a form Fishing crew member. 1040a form    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . 1040a form Insurance agent, former. 1040a form   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. 1040a form You received payments after your agreement to perform services for the company ended. 1040a form You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. 1040a form You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. 1040a form The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. 1040a form The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). 1040a form Insurance agent, retired. 1040a form   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. 1040a form Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. 1040a form   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. 1040a form Newspaper carrier or distributor. 1040a form   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. 1040a form You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). 1040a form Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. 1040a form You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. 1040a form   This rule applies whether or not you hire others to help you make deliveries. 1040a form It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. 1040a form Newspaper or magazine vendor. 1040a form   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. 1040a form You sell newspapers or magazines to ultimate consumers. 1040a form You sell them at a fixed price. 1040a form Your earnings are based on the difference between the sales price and your cost of goods sold. 1040a form   This rule applies whether or not you are guaranteed a minimum amount of earnings. 1040a form It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. 1040a form Notary public. 1040a form   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. 1040a form These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). 1040a form Public official. 1040a form   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. 1040a form This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. 1040a form Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. 1040a form   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. 1040a form Real estate agent or direct seller. 1040a form   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. 1040a form Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. 1040a form You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. 1040a form Securities dealer. 1040a form   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. 1040a form For more information, see sections 1256 and 1402(i). 1040a form Securities trader. 1040a form   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. 1040a form As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. 1040a form However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. 1040a form For more information about securities traders, see Publication 550, Investment Income and Expenses. 1040a form Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. 1040a form This section discusses some of the more common differences that may affect business transactions. 1040a form Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). 1040a form If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. 1040a form Dealers in real estate are not allowed to use inventories. 1040a form For more information on inventories, see chapter 2. 1040a form Income paid to a third party. 1040a form   All income you earn is taxable to you. 1040a form You cannot avoid tax by having the income paid to a third party. 1040a form Example. 1040a form You rent out your property and the rental agreement directs the lessee to pay the rent to your son. 1040a form The amount paid to your son is gross income to you. 1040a form Cash discounts. 1040a form   These are amounts the seller permits you to deduct from the invoice price for prompt payment. 1040a form For income tax purposes, you can use either of the following two methods to account for cash discounts. 1040a form Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). 1040a form Credit the cash discount to a discount income account. 1040a form You must use the chosen method every year for all your purchase discounts. 1040a form   If you use the second method, the credit balance in the account at the end of your tax year is business income. 1040a form Under this method, you do not reduce the cost of goods sold by the cash discounts you received. 1040a form When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. 1040a form Trade discounts. 1040a form   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. 1040a form Do not enter these discounts on your books of account. 1040a form Instead, use only the net amount as the cost of the merchandise purchased. 1040a form For more information, see Trade discounts in chapter 6. 1040a form Payment placed in escrow. 1040a form   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. 1040a form However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. 1040a form Sales returns and allowances. 1040a form   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. 1040a form Advance payments. 1040a form   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. 1040a form Insurance proceeds. 1040a form   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. 1040a form You cannot deduct the reimbursed part of a casualty or theft loss. 1040a form   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. 1040a form Prev  Up  Next   Home   More Online Publications