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1040x Form 2010

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1040x Form 2010

1040x form 2010 Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. 1040x form 2010 Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. 1040x form 2010 Method 2. 1040x form 2010 How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. 1040x form 2010 In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 1040x form 2010 You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. 1040x form 2010 Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. 1040x form 2010 If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. 1040x form 2010 These wages must be included on line 7 of Form 1040. 1040x form 2010 See Form 8919 for more information. 1040x form 2010 Childcare providers. 1040x form 2010   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. 1040x form 2010 If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 1040x form 2010 You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. 1040x form 2010 Babysitting. 1040x form 2010   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 1040x form 2010 Bankruptcy. 1040x form 2010   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. 1040x form 2010 Your W-2 will show your total wages and withheld income tax for the year. 1040x form 2010 On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. 1040x form 2010 Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. 1040x form 2010 If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. 1040x form 2010   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. 1040x form 2010 For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. 1040x form 2010   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. 1040x form 2010 The statement must show the allocation and describe the method used to make the allocation. 1040x form 2010 For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. 1040x form 2010 R. 1040x form 2010 B. 1040x form 2010 596, available at www. 1040x form 2010 irs. 1040x form 2010 gov/irb/2006-40_IRB/ar12. 1040x form 2010 html. 1040x form 2010 Miscellaneous Compensation This section discusses many types of employee compensation. 1040x form 2010 The subjects are arranged in alphabetical order. 1040x form 2010 Advance commissions and other earnings. 1040x form 2010   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. 1040x form 2010    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. 1040x form 2010 If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. 1040x form 2010 See Repayments , later. 1040x form 2010 Allowances and reimbursements. 1040x form 2010    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040x form 2010 If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 1040x form 2010 Back pay awards. 1040x form 2010   Include in income amounts you are awarded in a settlement or judgment for back pay. 1040x form 2010 These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 1040x form 2010 They should be reported to you by your employer on Form W-2. 1040x form 2010 Bonuses and awards. 1040x form 2010    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 1040x form 2010 These include prizes such as vacation trips for meeting sales goals. 1040x form 2010 If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. 1040x form 2010 However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. 1040x form 2010 Employee achievement award. 1040x form 2010   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. 1040x form 2010 However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. 1040x form 2010 Your employer can tell you whether your award is a qualified plan award. 1040x form 2010 Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. 1040x form 2010   However, the exclusion does not apply to the following awards. 1040x form 2010 A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. 1040x form 2010 A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. 1040x form 2010 Example. 1040x form 2010 Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. 1040x form 2010 Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 1040x form 2010 However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. 1040x form 2010 Differential wage payments. 1040x form 2010   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. 1040x form 2010 These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 1040x form 2010 The payments are reported as wages on Form W-2. 1040x form 2010 Government cost-of-living allowances. 1040x form 2010   Most payments received by U. 1040x form 2010 S. 1040x form 2010 Government civilian employees for working abroad are taxable. 1040x form 2010 However, certain cost-of-living allowances are tax free. 1040x form 2010 Publication 516, U. 1040x form 2010 S. 1040x form 2010 Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 1040x form 2010 Nonqualified deferred compensation plans. 1040x form 2010   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 1040x form 2010 This amount is shown on Form W-2, box 12, using code Y. 1040x form 2010 This amount is not included in your income. 1040x form 2010   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. 1040x form 2010 This amount is included in your wages shown on Form W-2, box 1. 1040x form 2010 It is also shown on Form W-2, box 12, using code Z. 1040x form 2010 Nonqualified deferred compensation plans of nonqualified entities. 1040x form 2010   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. 1040x form 2010 For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. 1040x form 2010 A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. 1040x form 2010 Note received for services. 1040x form 2010   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. 1040x form 2010 When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. 1040x form 2010 Do not include that part again in your income. 1040x form 2010 Include the rest of the payment in your income in the year of payment. 1040x form 2010   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. 1040x form 2010 Severance pay. 1040x form 2010   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 1040x form 2010 Accrued leave payment. 1040x form 2010   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. 1040x form 2010   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. 1040x form 2010 You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 1040x form 2010 Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. 1040x form 2010 Outplacement services. 1040x form 2010   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. 1040x form 2010    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). 1040x form 2010 Sick pay. 1040x form 2010   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 1040x form 2010 In addition, you must include in your income sick pay benefits received from any of the following payers. 1040x form 2010 A welfare fund. 1040x form 2010 A state sickness or disability fund. 1040x form 2010 An association of employers or employees. 1040x form 2010 An insurance company, if your employer paid for the plan. 1040x form 2010 However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 1040x form 2010 For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. 1040x form 2010 Social security and Medicare taxes paid by employer. 1040x form 2010   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. 1040x form 2010 The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 1040x form 2010 However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 1040x form 2010 Stock appreciation rights. 1040x form 2010   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 1040x form 2010 When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. 1040x form 2010 You include the cash payment in income in the year you use the right. 1040x form 2010 Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. 1040x form 2010 Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. 1040x form 2010 See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. 1040x form 2010 Recipient of fringe benefit. 1040x form 2010   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. 1040x form 2010 You are considered to be the recipient even if it is given to another person, such as a member of your family. 1040x form 2010 An example is a car your employer gives to your spouse for services you perform. 1040x form 2010 The car is considered to have been provided to you and not to your spouse. 1040x form 2010   You do not have to be an employee of the provider to be a recipient of a fringe benefit. 1040x form 2010 If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. 1040x form 2010 Provider of benefit. 1040x form 2010   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. 1040x form 2010 The provider can be a client or customer of an independent contractor. 1040x form 2010 Accounting period. 1040x form 2010   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 1040x form 2010 Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 1040x form 2010 The general rule: benefits are reported for a full calendar year (January 1–December 31). 1040x form 2010 The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. 1040x form 2010 For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. 1040x form 2010 Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. 1040x form 2010   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). 1040x form 2010 Form W-2. 1040x form 2010   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. 1040x form 2010 Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 1040x form 2010 However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). 1040x form 2010 Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. 1040x form 2010 Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . 1040x form 2010 For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 1040x form 2010 Long-term care coverage. 1040x form 2010   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 1040x form 2010 However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 1040x form 2010 This amount will be reported as wages in box 1 of your Form W-2. 1040x form 2010 Archer MSA contributions. 1040x form 2010    Contributions by your employer to your Archer MSA generally are not included in your income. 1040x form 2010 Their total will be reported in box 12 of Form W-2, with code R. 1040x form 2010 You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 1040x form 2010 File the form with your return. 1040x form 2010 Health flexible spending arrangement (health FSA). 1040x form 2010   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. 1040x form 2010   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 1040x form 2010 The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 1040x form 2010 For more information, see Notice 2012-40, 2012-26 I. 1040x form 2010 R. 1040x form 2010 B. 1040x form 2010 1046, available at www. 1040x form 2010 irs. 1040x form 2010 gov/irb/2012-26 IRB/ar09. 1040x form 2010 html. 1040x form 2010 Health reimbursement arrangement (HRA). 1040x form 2010   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. 1040x form 2010 Health savings accounts (HSA). 1040x form 2010   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 1040x form 2010 Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 1040x form 2010 Contributions made by your employer are not included in your income. 1040x form 2010 Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 1040x form 2010 Distributions not used for qualified medical expenses are included in your income. 1040x form 2010 See Publication 969 for the requirements of an HSA. 1040x form 2010   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 1040x form 2010 The contributions are treated as a distribution of money and are not included in the partner's gross income. 1040x form 2010 Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. 1040x form 2010 In both situations, the partner can deduct the contribution made to the partner's HSA. 1040x form 2010   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. 1040x form 2010 The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 1040x form 2010 Qualified HSA funding distribution. 1040x form 2010   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. 1040x form 2010 See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. 1040x form 2010 Failure to maintain eligibility. 1040x form 2010   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. 1040x form 2010 If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. 1040x form 2010 This income is also subject to an additional 10% tax. 1040x form 2010 Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. 1040x form 2010 See Instructions for Form 8839, Qualified Adoption Expenses, for more information. 1040x form 2010 Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 1040x form 2010 They also are included as social security and Medicare wages in boxes 3 and 5. 1040x form 2010 However, they are not included as wages in box 1. 1040x form 2010 To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 1040x form 2010 File the form with your return. 1040x form 2010 Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. 1040x form 2010 The gym must be used primarily by employees, their spouses, and their dependent children. 1040x form 2010 If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. 1040x form 2010 De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. 1040x form 2010 In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. 1040x form 2010 Also see Employee Discounts , later. 1040x form 2010 Holiday gifts. 1040x form 2010   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. 1040x form 2010 However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. 1040x form 2010 Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 1040x form 2010 Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. 1040x form 2010 The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 1040x form 2010 Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. 1040x form 2010 Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. 1040x form 2010 To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. 1040x form 2010 See the Instructions for Form 2441 for more information. 1040x form 2010 Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 1040x form 2010 For more information, see Publication 970. 1040x form 2010 Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. 1040x form 2010 The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. 1040x form 2010 However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). 1040x form 2010 The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. 1040x form 2010 For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. 1040x form 2010 (Ask your employer for this percentage. 1040x form 2010 ) For a discount on services, 20%. 1040x form 2010 Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. 1040x form 2010 If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). 1040x form 2010 Qualified retirement planning services paid for you by your employer may be excluded from your income. 1040x form 2010 For more information, see Retirement Planning Services , later. 1040x form 2010 Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. 1040x form 2010 However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. 1040x form 2010 For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. 1040x form 2010 If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. 1040x form 2010 Also, it is shown separately in box 12 with code C. 1040x form 2010 Group-term life insurance. 1040x form 2010   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. 1040x form 2010 Permanent benefits. 1040x form 2010   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. 1040x form 2010 Your employer should be able to tell you the amount to include in your income. 1040x form 2010 Accidental death benefits. 1040x form 2010   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. 1040x form 2010 Former employer. 1040x form 2010   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. 1040x form 2010 Also, it is shown separately in box 12 with code C. 1040x form 2010 Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 1040x form 2010 You must pay these taxes with your income tax return. 1040x form 2010 Include them on line 60, Form 1040, and follow the instructions forline 60. 1040x form 2010 For more information, see the Instructions for Form 1040. 1040x form 2010 Two or more employers. 1040x form 2010   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. 1040x form 2010 If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. 1040x form 2010 You must figure how much to include in your income. 1040x form 2010 Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. 1040x form 2010 Figuring the taxable cost. 1040x form 2010    Use the following worksheet to figure the amount to include in your income. 1040x form 2010   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. 1040x form 2010 However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . 1040x form 2010 Worksheet 1. 1040x form 2010 Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 1040x form 2010 Enter the total amount of your insurance coverage from your employer(s) 1. 1040x form 2010   2. 1040x form 2010 Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040x form 2010 50,000 3. 1040x form 2010 Subtract line 2 from line 1 3. 1040x form 2010   4. 1040x form 2010 Divide line 3 by $1,000. 1040x form 2010 Figure to the nearest tenth 4. 1040x form 2010   5. 1040x form 2010 Go to Table 1. 1040x form 2010 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 1040x form 2010   6. 1040x form 2010 Multiply line 4 by line 5 6. 1040x form 2010     7. 1040x form 2010 Enter the number of full months of coverage at this cost 7. 1040x form 2010   8. 1040x form 2010 Multiply line 6 by line 7 8. 1040x form 2010   9. 1040x form 2010 Enter the premiums you paid per month 9. 1040x form 2010       10. 1040x form 2010 Enter the number of months you paid the  premiums 10. 1040x form 2010       11. 1040x form 2010 Multiply line 9 by line 10. 1040x form 2010 11. 1040x form 2010   12. 1040x form 2010 Subtract line 11 from line 8. 1040x form 2010 Include this amount in your income as wages 12. 1040x form 2010   Table 1. 1040x form 2010 Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . 1040x form 2010 05     25 through 29 . 1040x form 2010 06     30 through 34 . 1040x form 2010 08     35 through 39 . 1040x form 2010 09     40 through 44 . 1040x form 2010 10     45 through 49 . 1040x form 2010 15     50 through 54 . 1040x form 2010 23     55 through 59 . 1040x form 2010 43     60 through 64 . 1040x form 2010 66     65 through 69 1. 1040x form 2010 27     70 and older 2. 1040x form 2010 06   Example. 1040x form 2010 You are 51 years old and work for employers A and B. 1040x form 2010 Both employers provide group-term life insurance coverage for you for the entire year. 1040x form 2010 Your coverage is $35,000 with employer A and $45,000 with employer B. 1040x form 2010 You pay premiums of $4. 1040x form 2010 15 a month under the employer B group plan. 1040x form 2010 You figure the amount to include in your income as follows. 1040x form 2010   Worksheet 1. 1040x form 2010 Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. 1040x form 2010 Enter the total amount of your insurance coverage from your employer(s) 1. 1040x form 2010 80,000 2. 1040x form 2010 Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040x form 2010 50,000 3. 1040x form 2010 Subtract line 2 from line 1 3. 1040x form 2010 30,000 4. 1040x form 2010 Divide line 3 by $1,000. 1040x form 2010 Figure to the nearest tenth 4. 1040x form 2010 30. 1040x form 2010 0 5. 1040x form 2010 Go to Table 1. 1040x form 2010 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 1040x form 2010 . 1040x form 2010 23 6. 1040x form 2010 Multiply line 4 by line 5 6. 1040x form 2010 6. 1040x form 2010 90 7. 1040x form 2010 Enter the number of full months of coverage at this cost. 1040x form 2010 7. 1040x form 2010 12 8. 1040x form 2010 Multiply line 6 by line 7 8. 1040x form 2010 82. 1040x form 2010 80 9. 1040x form 2010 Enter the premiums you paid per month 9. 1040x form 2010 4. 1040x form 2010 15     10. 1040x form 2010 Enter the number of months you paid the premiums 10. 1040x form 2010 12     11. 1040x form 2010 Multiply line 9 by line 10. 1040x form 2010 11. 1040x form 2010 49. 1040x form 2010 80 12. 1040x form 2010 Subtract line 11 from line 8. 1040x form 2010 Include this amount in your income as wages 12. 1040x form 2010 33. 1040x form 2010 00 The total amount to include in income for the cost of excess group-term life insurance is $33. 1040x form 2010 Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. 1040x form 2010 You must add it to the wages shown on your Forms W-2 and include the total on your return. 1040x form 2010 Entire cost excluded. 1040x form 2010   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 1040x form 2010 You are permanently and totally disabled and have ended your employment. 1040x form 2010 Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 1040x form 2010 A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. 1040x form 2010 (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 1040x form 2010 ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. 1040x form 2010 Entire cost taxed. 1040x form 2010   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. 1040x form 2010 The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 1040x form 2010 You are a key employee and your employer's plan discriminates in favor of key employees. 1040x form 2010 Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 1040x form 2010 The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. 1040x form 2010 The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. 1040x form 2010 (You must accept it in order to be able to properly perform your duties. 1040x form 2010 ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. 1040x form 2010 See De Minimis (Minimal) Benefits , earlier. 1040x form 2010 Faculty lodging. 1040x form 2010   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. 1040x form 2010 However, the lodging must be qualified campus lodging, and you must pay an adequate rent. 1040x form 2010 Academic health center. 1040x form 2010   This is an organization that meets the following conditions. 1040x form 2010 Its principal purpose or function is to provide medical or hospital care or medical education or research. 1040x form 2010 It receives payments for graduate medical education under the Social Security Act. 1040x form 2010 One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. 1040x form 2010 Qualified campus lodging. 1040x form 2010   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. 1040x form 2010 The lodging must be located on or near a campus of the educational institution or academic health center. 1040x form 2010 Adequate rent. 1040x form 2010   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. 1040x form 2010 If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. 1040x form 2010   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. 1040x form 2010 Example. 1040x form 2010 Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. 1040x form 2010 The house is appraised at $200,000. 1040x form 2010 The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. 1040x form 2010 Carl pays an annual rent of $11,000. 1040x form 2010 Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). 1040x form 2010 If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). 1040x form 2010 Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. 1040x form 2010 See Publication 521 for more information. 1040x form 2010 No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). 1040x form 2010 In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. 1040x form 2010 Example. 1040x form 2010 You are employed as a flight attendant for a company that owns both an airline and a hotel chain. 1040x form 2010 Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. 1040x form 2010 The value of the personal flight is not included in your income. 1040x form 2010 However, the value of the hotel room is included in your income because you do not work in the hotel business. 1040x form 2010 Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. 1040x form 2010 Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. 1040x form 2010 You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 1040x form 2010 Also, see Financial Counseling Fees , earlier. 1040x form 2010 Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 1040x form 2010 A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. 1040x form 2010 Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 1040x form 2010 However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. 1040x form 2010 Exclusion limit. 1040x form 2010   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 1040x form 2010   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 1040x form 2010   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 1040x form 2010   If the benefits have a value that is more than these limits, the excess must be included in your income. 1040x form 2010 You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 1040x form 2010 Commuter highway vehicle. 1040x form 2010   This is a highway vehicle that seats at least six adults (not including the driver). 1040x form 2010 At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). 1040x form 2010 Transit pass. 1040x form 2010   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. 1040x form 2010 Qualified parking. 1040x form 2010   This is parking provided to an employee at or near the employer's place of business. 1040x form 2010 It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. 1040x form 2010 It does not include parking at or near the employee's home. 1040x form 2010 Qualified bicycle commuting. 1040x form 2010   This is reimbursement based on the number of qualified bicycle commuting months for the year. 1040x form 2010 A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. 1040x form 2010 The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 1040x form 2010 Tuition Reduction You can exclude a qualified tuition reduction from your income. 1040x form 2010 This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. 1040x form 2010 For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. 1040x form 2010 Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. 1040x form 2010 For more information, see Publication 970. 1040x form 2010 Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. 1040x form 2010 Example. 1040x form 2010 You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. 1040x form 2010 The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. 1040x form 2010 Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. 1040x form 2010 For an exception, see Group-Term Life Insurance , earlier. 1040x form 2010 General valuation rule. 1040x form 2010   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. 1040x form 2010 If you pay fair market value for a fringe benefit, no amount is included in your income. 1040x form 2010 Fair market value. 1040x form 2010   The fair market value of a fringe benefit is determined by all the facts and circumstances. 1040x form 2010 It is the amount you would have to pay a third party to buy or lease the benefit. 1040x form 2010 This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. 1040x form 2010 Employer-provided vehicles. 1040x form 2010   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. 1040x form 2010   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. 1040x form 2010 An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. 1040x form 2010 The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. 1040x form 2010 Flights on employer-provided aircraft. 1040x form 2010   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. 1040x form 2010   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. 1040x form 2010 The division must be based on all the facts, including which employee or employees control the use of the aircraft. 1040x form 2010 Special valuation rules. 1040x form 2010   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. 1040x form 2010 If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. 1040x form 2010 You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. 1040x form 2010   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. 1040x form 2010 The special valuation rules are the following. 1040x form 2010 The automobile lease rule. 1040x form 2010 The vehicle cents-per-mile rule. 1040x form 2010 The commuting rule. 1040x form 2010 The unsafe conditions commuting rule. 1040x form 2010 The employer-operated eating-facility rule. 1040x form 2010   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040x form 2010    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. 1040x form 2010 61-21(g) and 1. 1040x form 2010 61-21(h) of the regulations. 1040x form 2010 Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 1040x form 2010 (Your employer can tell you whether your retirement plan is qualified. 1040x form 2010 ) However, the cost of life insurance coverage included in the plan may have to be included. 1040x form 2010 See Group-Term Life Insurance , earlier, under Fringe Benefits. 1040x form 2010 If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. 1040x form 2010 However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. 1040x form 2010 For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. 1040x form 2010 S. 1040x form 2010 Civil Service Retirement Benefits, if you are a federal employee or retiree). 1040x form 2010 Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. 1040x form 2010 The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 1040x form 2010 An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 1040x form 2010 However, it is included in wages subject to social security and Medicare taxes. 1040x form 2010 Elective deferrals include elective contributions to the following retirement plans. 1040x form 2010 Cash or deferred arrangements (section 401(k) plans). 1040x form 2010 The Thrift Savings Plan for federal employees. 1040x form 2010 Salary reduction simplified employee pension plans (SARSEP). 1040x form 2010 Savings incentive match plans for employees (SIMPLE plans). 1040x form 2010 Tax-sheltered annuity plans (403(b) plans). 1040x form 2010 Section 501(c)(18)(D) plans. 1040x form 2010 (But see Reporting by employer , later. 1040x form 2010 ) Section 457 plans. 1040x form 2010 Qualified automatic contribution arrangements. 1040x form 2010   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. 1040x form 2010 You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 1040x form 2010 The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. 1040x form 2010   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. 1040x form 2010 Overall limit on deferrals. 1040x form 2010   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. 1040x form 2010 The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. 1040x form 2010 Amounts deferred under specific plan limits are part of the overall limit on deferrals. 1040x form 2010   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 1040x form 2010 However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 1040x form 2010 Catch-up contributions. 1040x form 2010   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. 1040x form 2010 For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. 1040x form 2010   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. 1040x form 2010 SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. 1040x form 2010 Section 457 plans, see Limit for deferrals under section 457 plans , later. 1040x form 2010 Limit for deferrals under SIMPLE plans. 1040x form 2010   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. 1040x form 2010 Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. 1040x form 2010 Limit for tax-sheltered annuities. 1040x form 2010   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. 1040x form 2010 However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. 1040x form 2010 $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. 1040x form 2010   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. 1040x form 2010   For more information, see Publication 571. 1040x form 2010 Limit for deferral under section 501(c)(18) plans. 1040x form 2010   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. 1040x form 2010 Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. 1040x form 2010 Limit for deferrals under section 457 plans. 1040x form 2010   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. 1040x form 2010 However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. 1040x form 2010 See Increased limit , later. 1040x form 2010 Includible compensation. 1040x form 2010   This is the pay you received for the year from the employer who maintained the section 457 plan. 1040x form 2010 In most cases, it includes all the following payments. 1040x form 2010 Wages and salaries. 1040x form 2010 Fees for professional services. 1040x form 2010 The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. 1040x form 2010 Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. 1040x form 2010 Commissions and tips. 1040x form 2010 Fringe benefits. 1040x form 2010 Bonuses. 1040x form 2010 Employer contributions (elective deferrals) to: The section 457 plan. 1040x form 2010 Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. 1040x form 2010 A salary reduction simplified employee pension (SARSEP). 1040x form 2010 A tax-sheltered annuity (section 403(b) plan). 1040x form 2010 A savings incentive match plan for employees (SIMPLE plan). 1040x form 2010 A section 125 cafeteria plan. 1040x form 2010   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. 1040x form 2010 Your wages as defined for income tax withholding purposes. 1040x form 2010 Your wages as reported in box 1 of Form W-2. 1040x form 2010 Your wages that are subject to social security withholding (including elective deferrals). 1040x form 2010 Increased limit. 1040x form 2010   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). 1040x form 2010 Catch-up contributions. 1040x form 2010   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. 1040x form 2010 If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. 1040x form 2010 However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. 1040x form 2010 Designated Roth contributions. 1040x form 2010   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. 1040x form 2010 Designated Roth contributions are treated as elective deferrals, except that they are included in income. 1040x form 2010 Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. 1040x form 2010   Qualified distributions from a Roth plan are not included in income. 1040x form 2010 In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. 1040x form 2010 Reporting by employer. 1040x form 2010   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. 1040x form 2010 Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. 1040x form 2010 Section 501(c)(18)(D) contributions. 1040x form 2010   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. 1040x form 2010 The amount you contributed should be identified with code “H” in box 12. 1040x form 2010 You may deduct the amount deferred subject to the limits that apply. 1040x form 2010 Include your deduction in the total on Form 1040, line 36. 1040x form 2010 Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. 1040x form 2010 Designated Roth contributions. 1040x form 2010    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. 1040x form 2010 Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. 1040x form 2010 Excess deferrals. 1040x form 2010   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. 1040x form 2010 If the plan permits, the excess amount will be distributed to you. 1040x form 2010 If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. 1040x form 2010 You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. 1040x form 2010 The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. 1040x form 2010   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. 1040x form 2010 File Form 1040 to add the excess deferral amount to your wages on line 7. 1040x form 2010 Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. 1040x form 2010 Excess not distributed. 1040x form 2010   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. 1040x form 2010 Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. 1040x form 2010 Excess distributed to you. 1040x form 2010   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. 1040x form 2010 If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. 1040x form 2010 Any income on the excess deferral taken out is taxable in the tax year in which you take it out. 1040x form 2010 If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. 1040x form 2010    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. 1040x form 2010 Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. 1040x form 2010 If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. 1040x form 2010 Add the excess deferral amount to your wages on your 2013 tax return. 1040x form 2010 If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. 1040x form 2010 Do not add this amount to your wages on your 2013 return. 1040x form 2010 If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. 1040x form 2010 If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. 1040x form 2010 S. 1040x form 2010 Individual Income Tax Return. 1040x form 2010 If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. 1040x form 2010 If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. 1040x form 2010 Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. 1040x form 2010 Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. 1040x form 2010 Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. 1040x form 2010 ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040x form 2010 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040x form 2010 Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. 1040x form 2010 If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. 1040x form 2010 You must include the excess contributions in your income as wages on Form 1040, line 7. 1040x form 2010 You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. 1040x form 2010 If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. 1040x form 2010 The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. 1040x form 2010 You should receive a Form 1099-R for the year the excess contributions are distributed to you. 1040x form 2010 Add the distribution to your wages for that year. 1040x form 2010 Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040x form 2010 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040x form 2010 Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. 1040x form 2010 Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. 1040x form 2010 A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. 1040x form 2010 A corrective payment consisting of your after-tax contributions is not taxable. 1040x form 2010 If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. 1040x form 2010 Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. 1040x form 2010 Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. 1040x form 2010 Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040x form 2010 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040x form 2010 Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. 1040x form 2010 The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. 1040x form 2010 Your employer can tell you which kind of option you hold. 1040x form 2010 Nonstatutory Stock Options Grant of option. 1040x form 2010   If you are granted a nonstatutory stock option, you may have income when you receive the option. 1040x form 2010 The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. 1040x form 2010 The fair market value of an option can be readily determined if it is actively traded on an established market. 1040x form 2010    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. 1040x form 2010 You can transfer the option. 1040x form 2010 You can exercise the option immediately in full. 1040x form 2010 The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. 1040x form 2010 The fair market value of the option privilege can be readily determined. 1040x form 2010 The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. 1040x form 2010 For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. 1040x form 2010 The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. 1040x form 2010 If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. 1040x form 2010 For more information on the excise tax, see Internal Revenue Code section 4985. 1040x form 2010 Option with readily determinable value. 1040x form 2010   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. 1040x form 2010 See Restricted Property , later, for rules on how much income to include and when to include it. 1040x form 2010 However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. 1040x form 2010 Option without readily determinable value. 1040x form 2010   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. 1040x form 2010    Exercise or transfer of option. 1040x form 2010   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. 1040x form 2010 Option with readily determinable value. 1040x form 2010   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. 1040x form 2010 Option without readily determinable value. 1040x form 2010   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope
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The 1040x Form 2010

1040x form 2010 Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. 1040x form 2010 More information. 1040x form 2010 Exception—Community Income. 1040x form 2010 Exception—Qualified joint venture. 1040x form 2010 More information. 1040x form 2010 More information. 1040x form 2010 Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. 1040x form 2010 Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. 1040x form 2010 Table 1 can help you learn what those responsibilities are. 1040x form 2010 Ask yourself each question listed in the table, then see the related discussion to find the answer. 1040x form 2010 In addition to knowing about federal taxes, you need to make some basic business decisions. 1040x form 2010 Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. 1040x form 2010 For information on how to contact the SBA, see How to Get More Information, later. 1040x form 2010 Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. 1040x form 2010 When beginning a business, you must decide which form of business to use. 1040x form 2010 Legal and tax considerations enter into this decision. 1040x form 2010 Only tax considerations are discussed in this publication. 1040x form 2010 Your form of business determines which income tax return form you have to file. 1040x form 2010 See Table 2 to find out which form you have to file. 1040x form 2010 Sole proprietorships. 1040x form 2010   A sole proprietorship is an unincorporated business that is owned by one individual. 1040x form 2010 It is the simplest form of business organization to start and maintain. 1040x form 2010 The business has no existence apart from you, the owner. 1040x form 2010 Its liabilities are your personal liabilities. 1040x form 2010 You undertake the risks of the business for all assets owned, whether or not used in the business. 1040x form 2010 You include the income and expenses of the business on your personal tax return. 1040x form 2010 More information. 1040x form 2010   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. 1040x form 2010 If you are a farmer, see Publication 225, Farmer's Tax Guide. 1040x form 2010 Partnerships. 1040x form 2010   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. 1040x form 2010 Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. 1040x form 2010   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. 1040x form 2010 , from its operations, but it does not pay income tax. 1040x form 2010 Instead, it “passes through” any profits or losses to its partners. 1040x form 2010 Each partner includes his or her share of the partnership's items on his or her tax return. 1040x form 2010 More information. 1040x form 2010   For more information on partnerships, see Publication 541, Partnerships. 1040x form 2010 Husband and wife business. 1040x form 2010   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 1040x form 2010 Do not use Schedule C or C-EZ. 1040x form 2010 Instead, file Form 1065, U. 1040x form 2010 S. 1040x form 2010 Return of Partnership Income. 1040x form 2010 For more information, see Publication 541, Partnerships. 1040x form 2010 Exception—Community Income. 1040x form 2010   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 1040x form 2010 S. 1040x form 2010 possession, you can treat the business either as a sole proprietorship or a partnership. 1040x form 2010 The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 1040x form 2010 A change in your reporting position will be treated as a conversion of the entity. 1040x form 2010 Exception—Qualified joint venture. 1040x form 2010   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. 1040x form 2010 Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. 1040x form 2010 For an explanation of "material participation," see the Instructions for Schedule C, line G. 1040x form 2010   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 1040x form 2010 Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. 1040x form 2010 For more information, see Qualified Joint Venture in the Instructions for Schedule SE. 1040x form 2010 Corporations. 1040x form 2010   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. 1040x form 2010 A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. 1040x form 2010 A corporation can also take special deductions. 1040x form 2010   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. 1040x form 2010 However, shareholders cannot deduct any loss of the corporation. 1040x form 2010 More information. 1040x form 2010   For more information on corporations, see Publication 542, Corporations. 1040x form 2010 S corporations. 1040x form 2010   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. 1040x form 2010 Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. 1040x form 2010 On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. 1040x form 2010 More information. 1040x form 2010   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. 1040x form 2010 S. 1040x form 2010 Income Tax Return for an S Corporation. 1040x form 2010 Limited liability company. 1040x form 2010   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. 1040x form 2010 The members of an LLC are not personally liable for its debts. 1040x form 2010 An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. 1040x form 2010 7701-3. 1040x form 2010 For more information, see the instructions for Form 8832, Entity Classification Election. 1040x form 2010 Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. 1040x form 2010 The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). 1040x form 2010 An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. 1040x form 2010 An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. 1040x form 2010 You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. 1040x form 2010 You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. 1040x form 2010 This includes returns or documents filed to report the following information. 1040x form 2010 Interest, dividends, royalties, etc. 1040x form 2010 , paid to you. 1040x form 2010 Any amount paid to you as a dependent care provider. 1040x form 2010 Certain other amounts paid to you that total $600 or more for the year. 1040x form 2010 If you do not furnish your identification number as required, you may be subject to penalties. 1040x form 2010 See Penalties, later. 1040x form 2010 Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. 1040x form 2010 If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. 1040x form 2010 Applying for an EIN. 1040x form 2010   You may apply for an EIN: Online—Click on the EIN link at www. 1040x form 2010 irs. 1040x form 2010 gov/businesses/small. 1040x form 2010 The EIN is issued immediately once the application information is validated. 1040x form 2010 By telephone at 1-800-829-4933. 1040x form 2010 By mailing or faxing Form SS-4, Application for Employer Identification Number. 1040x form 2010 When to apply. 1040x form 2010   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. 1040x form 2010 If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. 1040x form 2010 If you apply by telephone or through the IRS website, you can get an EIN immediately. 1040x form 2010 If you apply by fax, you can get an EIN within 4 business days. 1040x form 2010   If you do not receive your EIN by the time a return is due, file your return anyway. 1040x form 2010 Write “Applied for” and the date you applied for the number in the space for the EIN. 1040x form 2010 Do not use your social security number as a substitute for an EIN on your tax returns. 1040x form 2010 More than one EIN. 1040x form 2010   You should have only one EIN. 1040x form 2010 If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. 1040x form 2010 Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. 1040x form 2010 The IRS will tell you which number to use. 1040x form 2010 More information. 1040x form 2010   For more information about EINs, see Publication 1635, Understanding Your EIN. 1040x form 2010 Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). 1040x form 2010 The forms used to report these payments must include the payee's identification number. 1040x form 2010 Employee. 1040x form 2010   If you have employees, you must get an SSN from each of them. 1040x form 2010 Record the name and SSN of each employee exactly as they are shown on the employee's social security card. 1040x form 2010 If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. 1040x form 2010 This may occur, for example, if the employee's name has changed due to marriage or divorce. 1040x form 2010   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. 1040x form 2010 This form is available at SSA offices or by calling 1-800-772-1213. 1040x form 2010 It is also available from the SSA website at www. 1040x form 2010 ssa. 1040x form 2010 gov. 1040x form 2010 Other payee. 1040x form 2010   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. 1040x form 2010 If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. 1040x form 2010   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. 1040x form 2010 This form is available from IRS offices or by calling 1-800-829-3676. 1040x form 2010 It is also available from the IRS website at IRS. 1040x form 2010 gov. 1040x form 2010    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. 1040x form 2010 For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. 1040x form 2010 Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. 1040x form 2010 A tax year is usually 12 consecutive months. 1040x form 2010 There are two kinds of tax years. 1040x form 2010 Calendar tax year. 1040x form 2010 A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. 1040x form 2010 Fiscal tax year. 1040x form 2010 A fiscal tax year is 12 consecutive months ending on the last day of any month except December. 1040x form 2010 A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. 1040x form 2010 If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. 1040x form 2010 You must use a calendar tax year if: You keep no books. 1040x form 2010 You have no annual accounting period. 1040x form 2010 Your present tax year does not qualify as a fiscal year. 1040x form 2010 You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. 1040x form 2010 For more information, see Publication 538, Accounting Periods and Methods. 1040x form 2010 First-time filer. 1040x form 2010   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. 1040x form 2010 You adopt a tax year by filing your first income tax return using that tax year. 1040x form 2010 You have not adopted a tax year if you merely did any of the following. 1040x form 2010 Filed an application for an extension of time to file an income tax return. 1040x form 2010 Filed an application for an employer identification number. 1040x form 2010 Paid estimated taxes for that tax year. 1040x form 2010 Changing your tax year. 1040x form 2010   Once you have adopted your tax year, you may have to get IRS approval to change it. 1040x form 2010 To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. 1040x form 2010 You may have to pay a fee. 1040x form 2010 For more information, see Publication 538. 1040x form 2010 Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. 1040x form 2010 You choose an accounting method for your business when you file your first income tax return. 1040x form 2010 There are two basic accounting methods. 1040x form 2010 Cash method. 1040x form 2010 Under the cash method, you report income in the tax year you receive it. 1040x form 2010 You usually deduct or capitalize expenses in the tax year you pay them. 1040x form 2010 Accrual method. 1040x form 2010 Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. 1040x form 2010 You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. 1040x form 2010 For other methods, see Publication 538. 1040x form 2010 If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. 1040x form 2010 Inventories include goods held for sale in the normal course of business. 1040x form 2010 They also include raw materials and supplies that will physically become a part of merchandise intended for sale. 1040x form 2010 Inventories are explained in Publication 538. 1040x form 2010 Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. 1040x form 2010 For more information, see Publication 538. 1040x form 2010 You must use the same accounting method to figure your taxable income and to keep your books. 1040x form 2010 Also, you must use an accounting method that clearly shows your income. 1040x form 2010 In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. 1040x form 2010 An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. 1040x form 2010 More than one business. 1040x form 2010   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. 1040x form 2010 You must keep a complete and separate set of books and records for each business. 1040x form 2010 Changing your method of accounting. 1040x form 2010   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. 1040x form 2010 A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. 1040x form 2010 For examples of changes that require approval and information on how to get approval for the change, see Publication 538. 1040x form 2010 Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. 1040x form 2010 The following are the four general kinds of business taxes. 1040x form 2010 Income tax. 1040x form 2010 Self-employment tax. 1040x form 2010 Employment taxes. 1040x form 2010 Excise taxes. 1040x form 2010 See Table 2 for the forms you file to report these taxes. 1040x form 2010 You may want to get Publication 509. 1040x form 2010 It has tax calendars that tell you when to file returns and make tax payments. 1040x form 2010 Income Tax All businesses except partnerships must file an annual income tax return. 1040x form 2010 Partnerships file an information return. 1040x form 2010 Which form you use depends on how your business is organized. 1040x form 2010 See Table 2 to find out which return you have to file. 1040x form 2010 The federal income tax is a pay-as-you-go tax. 1040x form 2010 You must pay the tax as you earn or receive income during the year. 1040x form 2010 An employee usually has income tax withheld from his or her pay. 1040x form 2010 If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. 1040x form 2010 If you are not required to make estimated tax payments, you may pay any tax due when you file your return. 1040x form 2010 Table 2. 1040x form 2010 Which Forms Must I File? IF you are a. 1040x form 2010 . 1040x form 2010 . 1040x form 2010   THEN you may be liable for. 1040x form 2010 . 1040x form 2010 . 1040x form 2010   Use Form. 1040x form 2010 . 1040x form 2010 . 1040x form 2010 Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. 1040x form 2010 2 Various other schedules may be needed. 1040x form 2010 Estimated tax. 1040x form 2010   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. 1040x form 2010 Sole proprietors, partners, and S corporation shareholders. 1040x form 2010   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. 1040x form 2010 Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. 1040x form 2010 For more information, see Publication 505, Tax Withholding and Estimated Tax. 1040x form 2010 Corporations. 1040x form 2010   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. 1040x form 2010 Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. 1040x form 2010 You must deposit the payments as explained later under Depositing Taxes. 1040x form 2010 For more information, see Publication 542. 1040x form 2010 Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. 1040x form 2010 Your payments of SE tax contribute to your coverage under the social security system. 1040x form 2010 Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. 1040x form 2010 You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. 1040x form 2010 Your net earnings from self-employment were $400 or more. 1040x form 2010 You had church employee income of $108. 1040x form 2010 28 or more. 1040x form 2010 Use Schedule SE (Form 1040) to figure your SE tax. 1040x form 2010 For more information, see Publication 334, Tax Guide for Small Business. 1040x form 2010 You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. 1040x form 2010 The Social Security Administration (SSA) time limit for posting self-employment income. 1040x form 2010   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. 1040x form 2010 If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. 1040x form 2010 The SSA will not change its records to increase your self-employment income. 1040x form 2010 Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. 1040x form 2010 Employment taxes include the following. 1040x form 2010 Social security and Medicare taxes. 1040x form 2010 Federal income tax withholding. 1040x form 2010 Federal unemployment (FUTA) tax. 1040x form 2010 If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. 1040x form 2010 If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. 1040x form 2010 These publications explain your tax responsibilities as an employer. 1040x form 2010 If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. 1040x form 2010 That publication has information to help you determine whether an individual is an employee or an independent contractor. 1040x form 2010 If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. 1040x form 2010 An independent contractor is someone who is self-employed. 1040x form 2010 Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. 1040x form 2010 Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. 1040x form 2010 To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. 1040x form 2010 Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). 1040x form 2010 Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. 1040x form 2010 Medicare tax pays for benefits under the hospital insurance part of FICA. 1040x form 2010 You withhold part of these taxes from your employee's wages and you pay a part yourself. 1040x form 2010 To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. 1040x form 2010 Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. 1040x form 2010 (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. 1040x form 2010 ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. 1040x form 2010 You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. 1040x form 2010 You pay FUTA tax only from your own funds. 1040x form 2010 Employees do not pay this tax or have it withheld from their pay. 1040x form 2010 Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. 1040x form 2010 See Publication 15 to find out if you can use this form. 1040x form 2010 Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. 1040x form 2010 Form I-9. 1040x form 2010   You must verify that each new employee is legally eligible to work in the United States. 1040x form 2010 Both you and the employee must complete the U. 1040x form 2010 S. 1040x form 2010 Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 1040x form 2010 You can get the form from USCIS offices or from the USCIS website at www. 1040x form 2010 uscis. 1040x form 2010 gov. 1040x form 2010 Call the USCIS at 1-800-375-5283 for more information about your responsibilities. 1040x form 2010 Form W-4. 1040x form 2010   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. 1040x form 2010 You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. 1040x form 2010 For more information, see Publication 15. 1040x form 2010 Employees claiming more than 10 withholding allowances. 1040x form 2010   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. 1040x form 2010 See section 16 of Publication 15. 1040x form 2010 Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. 1040x form 2010 You must also send copies to the Social Security Administration. 1040x form 2010 See Information Returns, later, for more information on Form W-2. 1040x form 2010 Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. 1040x form 2010 Manufacture or sell certain products. 1040x form 2010 Operate certain kinds of businesses. 1040x form 2010 Use various kinds of equipment, facilities, or products. 1040x form 2010 Receive payment for certain services. 1040x form 2010 For more information on excise taxes, see Publication 510, Excise Taxes. 1040x form 2010 Form 720. 1040x form 2010   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. 1040x form 2010 Environmental taxes. 1040x form 2010 Communications and air transportation taxes. 1040x form 2010 Fuel taxes. 1040x form 2010 Tax on the first retail sale of heavy trucks, trailers, and tractors. 1040x form 2010 Manufacturers taxes on the sale or use of a variety of different articles. 1040x form 2010 Form 2290. 1040x form 2010   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. 1040x form 2010 The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. 1040x form 2010 Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. 1040x form 2010 For more information, see the instructions for Form 2290. 1040x form 2010 Form 730. 1040x form 2010   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. 1040x form 2010 Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. 1040x form 2010 Form 11-C. 1040x form 2010   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. 1040x form 2010 Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. 1040x form 2010 Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). 1040x form 2010 Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. 1040x form 2010 Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. 1040x form 2010 Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. 1040x form 2010 The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. 1040x form 2010 You must give a copy of each information return you are required to file to the recipient or payer. 1040x form 2010 In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. 1040x form 2010 For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. 1040x form 2010 Form 1099-MISC. 1040x form 2010   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. 1040x form 2010 These payments include the following items. 1040x form 2010 Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. 1040x form 2010 Rent payments of $600 or more, other than rents paid to real estate agents. 1040x form 2010 Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. 1040x form 2010 Royalty payments of $10 or more. 1040x form 2010 Payments to certain crew members by operators of fishing boats. 1040x form 2010 You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. 1040x form 2010 Form W-2. 1040x form 2010   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. 1040x form 2010 For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. 1040x form 2010 Form 8300. 1040x form 2010   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. 1040x form 2010 Cash includes U. 1040x form 2010 S. 1040x form 2010 and foreign coin and currency. 1040x form 2010 It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. 1040x form 2010 For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). 1040x form 2010 Penalties The law provides penalties for not filing returns or paying taxes as required. 1040x form 2010 Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. 1040x form 2010 Failure to file tax returns. 1040x form 2010   If you do not file your tax return by the due date, you may have to pay a penalty. 1040x form 2010 The penalty is based on the tax not paid by the due date. 1040x form 2010 See your tax return instructions for more information about this penalty. 1040x form 2010 Failure to pay tax. 1040x form 2010   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. 1040x form 2010 For more information, see your tax return instructions. 1040x form 2010 Failure to withhold, deposit, or pay taxes. 1040x form 2010   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. 1040x form 2010 You may also be subject to penalties if you deposit the taxes late. 1040x form 2010 For more information, see Publication 15. 1040x form 2010 Failure to follow information reporting requirements. 1040x form 2010   The following penalties apply if you are required to file information returns. 1040x form 2010 For more information, see the General Instructions for Certain Information Returns. 1040x form 2010 Failure to file information returns. 1040x form 2010 A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. 1040x form 2010 Failure to furnish correct payee statements. 1040x form 2010 A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. 1040x form 2010 Waiver of penalty. 1040x form 2010   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. 1040x form 2010   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. 1040x form 2010 (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. 1040x form 2010 ) Failure to supply taxpayer identification number. 1040x form 2010   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. 1040x form 2010 You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. 1040x form 2010 Business Expenses You can deduct business expenses on your income tax return. 1040x form 2010 These are the current operating costs of running your business. 1040x form 2010 To be deductible, a business expense must be both ordinary and necessary. 1040x form 2010 An ordinary expense is one that is common and accepted in your field of business, trade, or profession. 1040x form 2010 A necessary expense is one that is helpful and appropriate for your business, trade, or profession. 1040x form 2010 An expense does not have to be indispensable to be considered necessary. 1040x form 2010 The following are brief explanations of some expenses that are of interest to people starting a business. 1040x form 2010 There are many other expenses that you may be able to deduct. 1040x form 2010 See your form instructions and Publication 535, Business Expenses. 1040x form 2010 Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. 1040x form 2010 Your business start-up costs will depend on the type of business you are starting. 1040x form 2010 They may include costs for advertising, travel, surveys, and training. 1040x form 2010 These costs are generally capital expenses. 1040x form 2010 You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). 1040x form 2010 You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. 1040x form 2010 The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 1040x form 2010 Any remaining cost must be amortized. 1040x form 2010 For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. 1040x form 2010 Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. 1040x form 2010 You must spread the cost over more than one tax year and deduct part of it each year. 1040x form 2010 This method of deducting the cost of business property is called depreciation. 1040x form 2010 Business property you must depreciate includes the following items. 1040x form 2010 Office furniture. 1040x form 2010 Buildings. 1040x form 2010 Machinery and equipment. 1040x form 2010 You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. 1040x form 2010 This deduction is known as the “section 179 deduction. 1040x form 2010 ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. 1040x form 2010 Depreciation must be taken in the year it is allowable. 1040x form 2010 Allowable depreciation not taken in a prior year cannot be taken in the current year. 1040x form 2010 If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. 1040x form 2010 S. 1040x form 2010 Individual Income Tax Return, or by changing your accounting method. 1040x form 2010 For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. 1040x form 2010 Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. 1040x form 2010 Even then, your deduction may be limited. 1040x form 2010 To qualify to claim expenses for business use of your home, you must meet both the following tests. 1040x form 2010 Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. 1040x form 2010 Exclusive use. 1040x form 2010   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 1040x form 2010 The area used for business can be a room or other separately identifiable space. 1040x form 2010 The space does not need to be marked off by a permanent partition. 1040x form 2010   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 1040x form 2010 Exceptions to exclusive use. 1040x form 2010   You do not have to meet the exclusive use test if either of the following applies. 1040x form 2010 You use part of your home for the storage of inventory or product samples. 1040x form 2010 You use part of your home as a daycare facility. 1040x form 2010 For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). 1040x form 2010 Principal place of business. 1040x form 2010   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. 1040x form 2010 You use it exclusively and regularly for administrative or management activities of your trade or business. 1040x form 2010 You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 1040x form 2010   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. 1040x form 2010 The relative importance of the activities performed at each location. 1040x form 2010 If the relative importance factor does not determine your principal place of business, the time spent at each location. 1040x form 2010    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 1040x form 2010 However, for other ways to qualify to deduct home office expenses, see Publication 587. 1040x form 2010 Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. 1040x form 2010 If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. 1040x form 2010 More information. 1040x form 2010   For more information about business use of your home, see Publication 587. 1040x form 2010 Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. 1040x form 2010 You generally can deduct either your actual expenses or the standard mileage rate. 1040x form 2010 Actual expenses. 1040x form 2010   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. 1040x form 2010 You can divide your expenses based on the miles driven for each purpose. 1040x form 2010 Example. 1040x form 2010 You are the sole proprietor of a flower shop. 1040x form 2010 You drove your van 20,000 miles during the year. 1040x form 2010 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. 1040x form 2010 You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. 1040x form 2010 Standard mileage rate. 1040x form 2010   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. 1040x form 2010 You can use the standard mileage rate for a vehicle you own or lease. 1040x form 2010 The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. 1040x form 2010 It is announced annually by the IRS. 1040x form 2010 To figure your deduction, multiply your business miles by the standard mileage rate for the year. 1040x form 2010    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. 1040x form 2010 However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. 1040x form 2010 Choosing the standard mileage rate. 1040x form 2010   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 1040x form 2010 In later years, you can choose to use either the standard mileage rate or actual expenses. 1040x form 2010   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). 1040x form 2010 Additional information. 1040x form 2010   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040x form 2010 Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. 1040x form 2010 It also explains how long you must keep your records for federal tax purposes. 1040x form 2010 A sample recordkeeping system is illustrated at the end of this part. 1040x form 2010 Why Keep Records? Everyone in business must keep records. 1040x form 2010 Good records will help you do the following. 1040x form 2010 Monitor the progress of your business. 1040x form 2010   You need good records to monitor the progress of your business. 1040x form 2010 Records can show whether your business is improving, which items are selling, or what changes you need to make. 1040x form 2010 Good records can increase the likelihood of business success. 1040x form 2010 Prepare your financial statements. 1040x form 2010   You need good records to prepare accurate financial statements. 1040x form 2010 These include income (profit and loss) statements and balance sheets. 1040x form 2010 These statements can help you in dealing with your bank or creditors and help you manage your business. 1040x form 2010 An income statement shows the income and expenses of the business for a given period of time. 1040x form 2010 A balance sheet shows the assets, liabilities, and your equity in the business on a given date. 1040x form 2010 Identify source of receipts. 1040x form 2010   You will receive money or property from many sources. 1040x form 2010 Your records can identify the source of your receipts. 1040x form 2010 You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. 1040x form 2010 Keep track of deductible expenses. 1040x form 2010   You may forget expenses when you prepare your tax return unless you record them when they occur. 1040x form 2010 Prepare your tax returns. 1040x form 2010   You need good records to prepare your tax returns. 1040x form 2010 These records must support the income, expenses, and credits you report. 1040x form 2010 Generally, these are the same records you use to monitor your business and prepare your financial statements. 1040x form 2010 Support items reported on tax returns. 1040x form 2010   You must keep your business records available at all times for inspection by the IRS. 1040x form 2010 If the IRS examines any of your tax returns, you may be asked to explain the items reported. 1040x form 2010 A complete set of records will speed up the examination. 1040x form 2010 Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. 1040x form 2010 You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. 1040x form 2010 The business you are in affects the type of records you need to keep for federal tax purposes. 1040x form 2010 You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. 1040x form 2010 See Accounting Method, earlier. 1040x form 2010 If you are in more than one business, you should keep a complete and separate set of records for each business. 1040x form 2010 A corporation should keep minutes of board of directors' meetings. 1040x form 2010 Your recordkeeping system should include a summary of your business transactions. 1040x form 2010 This summary is ordinarily made in your books (for example, accounting journals and ledgers). 1040x form 2010 Your books must show your gross income, as well as your deductions and credits. 1040x form 2010 For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. 1040x form 2010 In addition, you must keep supporting documents, explained later. 1040x form 2010 Electronic records. 1040x form 2010   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. 1040x form 2010 When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. 1040x form 2010 An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. 1040x form 2010 The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. 1040x form 2010 All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. 1040x form 2010 Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. 1040x form 2010   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. 1040x form 2010 You still have the responsibility of retaining any other books and records that are required to be retained. 1040x form 2010   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. 1040x form 2010 This test is not considered an examination and the results must be shared with you. 1040x form 2010 If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. 1040x form 2010 If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. 1040x form 2010 For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. 1040x form 2010 Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. 1040x form 2010 Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. 1040x form 2010 These documents contain information you need to record in your books. 1040x form 2010 It is important to keep these documents because they support the entries in your books and on your tax return. 1040x form 2010 Keep them in an orderly fashion and in a safe place. 1040x form 2010 For instance, organize them by year and type of income or expense. 1040x form 2010 Gross receipts. 1040x form 2010   Gross receipts are the income you receive from your business. 1040x form 2010 You should keep supporting documents that show the amounts and sources of your gross receipts. 1040x form 2010 Documents that show gross receipts include the following. 1040x form 2010 Cash register tapes. 1040x form 2010 Bank deposit slips. 1040x form 2010 Receipt books. 1040x form 2010 Invoices. 1040x form 2010 Credit card charge slips. 1040x form 2010 Forms 1099-MISC. 1040x form 2010 Purchases. 1040x form 2010   Purchases are the items you buy and resell to customers. 1040x form 2010 If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. 1040x form 2010 Your supporting documents should show the amount paid and that the amount was for purchases. 1040x form 2010 Documents for purchases include the following. 1040x form 2010 Canceled checks. 1040x form 2010 Cash register tape receipts. 1040x form 2010 Credit card sales slips. 1040x form 2010 Invoices. 1040x form 2010 These records will help you determine the value of your inventory at the end of the year. 1040x form 2010 See Publication 538 for information on methods for valuing inventory. 1040x form 2010 Expenses. 1040x form 2010   Expenses are the costs you incur (other than purchases) to carry on your business. 1040x form 2010 Your supporting documents should show the amount paid and that the amount was for a business expense. 1040x form 2010 Documents for expenses include the following. 1040x form 2010 Canceled checks. 1040x form 2010 Cash register tapes. 1040x form 2010 Account statements. 1040x form 2010 Credit card sales slips. 1040x form 2010 Invoices. 1040x form 2010 Petty cash slips for small cash payments. 1040x form 2010    A petty cash fund allows you to make small payments without having to write checks for small amounts. 1040x form 2010 Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. 1040x form 2010 Travel, transportation, entertainment, and gift expenses. 1040x form 2010   Specific recordkeeping rules apply to these expenses. 1040x form 2010 For more information, see Publication 463. 1040x form 2010 Employment taxes. 1040x form 2010   There are specific employment tax records you must keep. 1040x form 2010 For a list, see Publication 15. 1040x form 2010 Assets. 1040x form 2010   Assets are the property, such as machinery and furniture you own and use in your business. 1040x form 2010 You must keep records to verify certain information about your business assets. 1040x form 2010 You need records to figure the annual depreciation and the gain or loss when you sell the assets. 1040x form 2010 Your records should show the following information. 1040x form 2010 When and how you acquired the asset. 1040x form 2010 Purchase price. 1040x form 2010 Cost of any improvements. 1040x form 2010 Section 179 deduction taken. 1040x form 2010 Deductions taken for depreciation. 1040x form 2010 Deductions taken for casualty losses, such as losses resulting from fires or storms. 1040x form 2010 How you used the asset. 1040x form 2010 When and how you disposed of the asset. 1040x form 2010 Selling price. 1040x form 2010 Expenses of sale. 1040x form 2010   The following documents may show this information. 1040x form 2010 Purchase and sales invoices. 1040x form 2010 Real estate closing statements. 1040x form 2010 Canceled checks. 1040x form 2010 What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. 1040x form 2010 These include account statements prepared for the financial institution by a third party. 1040x form 2010 These account statements must be highly legible. 1040x form 2010 The following table lists acceptable account statements. 1040x form 2010  IF payment is by. 1040x form 2010 . 1040x form 2010 . 1040x form 2010 THEN the statement must show the. 1040x form 2010 . 1040x form 2010 . 1040x form 2010 Check Check number. 1040x form 2010 Amount. 1040x form 2010 Payee's name. 1040x form 2010 Date the check amount was posted to the account by the financial institution. 1040x form 2010 Electronic funds transfer Amount transferred. 1040x form 2010 Payee's name. 1040x form 2010 Date the transfer was posted to the account by the financial institution. 1040x form 2010 Credit card Amount charged. 1040x form 2010 Payee's name. 1040x form 2010 Transaction date. 1040x form 2010    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. 1040x form 2010 You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. 1040x form 2010 Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. 1040x form 2010 (Your business transactions are shown on the supporting documents just discussed. 1040x form 2010 ) Business transactions are ordinarily summarized in books called journals and ledgers. 1040x form 2010 You can buy them at your local stationery or office supply store. 1040x form 2010 A journal is a book where you record each business transaction shown on your supporting documents. 1040x form 2010 You may have to keep separate journals for transactions that occur frequently. 1040x form 2010 A ledger is a book that contains the totals from all of your journals. 1040x form 2010 It is organized into different accounts. 1040x form 2010 Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. 1040x form 2010 For example, a recordkeeping system for a small business might include the following items. 1040x form 2010 Business checkbook. 1040x form 2010 Daily summary of cash receipts. 1040x form 2010 Monthly summary of cash receipts. 1040x form 2010 Check disbursements journal. 1040x form 2010 Depreciation worksheet. 1040x form 2010 Employee compensation record. 1040x form 2010 The business checkbook is explained next. 1040x form 2010 The other items are illustrated later under Sample Record System. 1040x form 2010 The system you use to record business transactions will be more effective if you follow good recordkeeping practices. 1040x form 2010 For example, record expenses when they occur, and identify the source of recorded receipts. 1040x form 2010 Generally, it is best to record transactions on a daily basis. 1040x form 2010 Business checkbook. 1040x form 2010   One of the first things you should do when you start a business is open a business checking account. 1040x form 2010 You should keep your business account separate from your personal checking account. 1040x form 2010   The business checkbook is your basic source of information for recording your business expenses. 1040x form 2010 You should deposit all daily receipts in your business checking account. 1040x form 2010 You should check your account for errors by reconciling it. 1040x form 2010 See Reconciling the checking account, later. 1040x form 2010   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. 1040x form 2010 You should also note on the deposit slip the source of the deposit and keep copies of all slips. 1040x form 2010   You should make all payments by check to document business expenses. 1040x form 2010 Write checks payable to yourself only when making withdrawals from your business for personal use. 1040x form 2010 Avoid writing checks payable to cash. 1040x form 2010 If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. 1040x form 2010 If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. 1040x form 2010    Use the business account for business purposes only. 1040x form 2010 Indicate the source of deposits and the type of expense in the checkbook. 1040x form 2010 Reconciling the checking account. 1040x form 2010   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. 1040x form 2010 The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. 1040x form 2010   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. 1040x form 2010    You should reconcile your checking account each month. 1040x form 2010     Before you reconcile your monthly bank statement, check your own figures. 1040x form 2010 Begin with the balance shown in your checkbook at the end of the previous month. 1040x form 2010 To this balance, add the total cash deposited during the month and subtract the total cash disbursements. 1040x form 2010   After checking your figures, the result should agree with your checkbook balance at the end of the month. 1040x form 2010 If the result does not agree, you may have made an error in recording a check or deposit. 1040x form 2010 You can find the error by doing the following. 1040x form 2010 Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. 1040x form 2010 If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. 1040x form 2010 Adding the deposit amounts in your checkbook. 1040x form 2010 Compare that total with the monthly total in your cash receipt book, if you have one. 1040x form 2010 If the totals do not agree, check the individual amounts to find any errors. 1040x form 2010   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. 1040x form 2010   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. 1040x form 2010 Many banks print a reconciliation worksheet on the back of the statement. 1040x form 2010   To reconcile your account, follow these steps. 1040x form 2010 Compare the deposits listed on the bank statement with the deposits shown in your checkbook. 1040x form 2010 Note all differences in the dollar amounts. 1040x form 2010 Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. 1040x form 2010 Note all differences in the dollar amounts. 1040x form 2010 Mark the check number in the checkbook as having cleared the bank. 1040x form 2010 After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. 1040x form 2010 Prepare a bank reconciliation. 1040x form 2010 One is illustrated later under Sample Record System. 1040x form 2010 Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. 1040x form 2010 At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. 1040x form 2010 If you still have differences, check the previous steps to find the errors. 1040x form 2010   Table 3. 1040x form 2010 Period of Limitations IF you. 1040x form 2010 . 1040x form 2010 . 1040x form 2010   THEN the period is. 1040x form 2010 . 1040x form 2010 . 1040x form 2010 1. 1040x form 2010 Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. 1040x form 2010 Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. 1040x form 2010 File a fraudulent return   Not limited 4. 1040x form 2010 Do not file a return   Not limited 5. 1040x form 2010 File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. 1040x form 2010 File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. 1040x form 2010 The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. 1040x form 2010 You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. 1040x form 2010 Single-entry. 1040x form 2010   A single-entry system is based on the income statement (profit or loss statement). 1040x form 2010 It can be a simple and practical system if you are starting a small business. 1040x form 2010 The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. 1040x form 2010 Double-entry. 1040x form 2010   A double-entry bookkeeping system uses journals and ledgers. 1040x form 2010 Transactions are first entered in a journal and then posted to ledger accounts. 1040x form 2010 These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). 1040x form 2010 You close income and expense accounts at the end of each tax year. 1040x form 2010 You keep asset, liability, and net worth accounts open on a permanent basis. 1040x form 2010   In the double-entry system, each account has a left side for debits and a right side for credits. 1040x form 2010 It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. 1040x form 2010   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. 1040x form 2010 If the amounts do not balance, you have made an error and you must find and correct it. 1040x form 2010   An example of a journal entry exhibiting a payment of rent in October is shown next. 1040x form 2010 General Journal Date Description of Entry Debit  Credit Oct. 1040x form 2010 5 Rent expense 780. 1040x form 2010 00     Cash   780. 1040x form 2010 00                 Computerized System There are computer software packages you can use for recordkeeping. 1040x form 2010 They can be purchased in many retail stores. 1040x form 2010 These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. 1040x form 2010 If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. 1040x form 2010 To meet this qualification, the machine-sensible records must reconcile with your books and return. 1040x form 2010 These records must provide enough detail to identify the underlying source documents. 1040x form 2010 You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. 1040x form 2010 This documentation must be sufficiently detailed to show all of the following items. 1040x form 2010 Functions being performed as the data flows through the system. 1040x form 2010 Controls used to ensure accurate and reliable processing. 1040x form 2010 Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. 1040x form 2010 Charts of accounts and detailed account descriptions. 1040x form 2010 See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. 1040x form 2010 How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. 1040x form 2010 Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. 1040x form 2010 The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. 1040x form 2010 Table 3 contains the periods of limitations that apply to income tax returns. 1040x form 2010 Unless otherwise stated, the years refer to the period after the return was filed. 1040x form 2010 Returns filed before the due date are treated as filed on the due date. 1040x form 2010 Keep copies of your filed tax returns. 1040x form 2010 They help in preparing future tax returns and making computations if you file an amended return. 1040x form 2010 Employment taxes. 1040x form 2010   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. 1040x form 2010 For more information about recordkeeping for employment taxes, see Publication 15. 1040x form 2010 Assets. 1040x form 2010   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. 1040x form 2010 You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. 1040x form 2010   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. 1040x form 2010 You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. 1040x form 2010 Records for nontax purposes. 1040x form 2010   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. 1040x form 2010 For example, your insurance company or creditors may require you to keep them longer than the IRS does. 1040x form 2010 Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. 1040x form 2010 Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. 1040x form 2010 These sample records should not be viewed as a recommendation of how to keep your records. 1040x form 2010 They are intended only to show how one business keeps its records. 1040x form 2010 1. 1040x form 2010 Daily Summary of Cash Receipts This summary is a record of cash sales for the day. 1040x form 2010 It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. 1040x form 2010 Henry takes the cash sales entry from his cash register tape. 1040x form 2010 If he had no cash register, he would simply total his cash sale slips and any other cash received that day. 1040x form 2010 He carries the total receipts shown in this summary for January 3 ($267. 1040x form 2010 80), including cash sales ($263. 1040x form 2010 60) and sales tax ($4. 1040x form 2010 20), to the Monthly Summary of Cash Receipts. 1040x form 2010 Petty cash fund. 1040x form 2010   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. 1040x form 2010 Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. 1040x form 2010 He sets up a fixed amount ($50) in his petty cash fund. 1040x form 2010 The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. 1040x form 2010 When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. 1040x form 2010 (See the Check Disbursements Journal entry for check number 92. 1040x form 2010 ) This restores the fund to its fixed amount of $50. 1040x form 2010 He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. 1040x form 2010 2. 1040x form 2010 Monthly Summary of Cash Receipts This shows the income activity for the month. 1040x form 2010 Henry carries the total monthly net sales shown in this summary for January ($4,865. 1040x form 2010 05) to his Annual Summary. 1040x form 2010 To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. 1040x form 2010 He cannot take a deduction for sales tax turned over to the state because he only collected the tax. 1040x form 2010 He does not include the tax in his income. 1040x form 2010 3. 1040x form 2010 Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. 1040x form 2010 All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. 1040x form 2010 Frequent expenses have their own headings across the sheet. 1040x form 2010 He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. 1040x form 2010 Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. 1040x form 2010 Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. 1040x form 2010 If he did, he would record them in the journal, even though he could not deduct them as business expenses. 1040x form 2010 Henry carries the January total of expenses for materials ($1,083. 1040x form 2010 50) to the Annual Summary. 1040x form 2010 Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. 1040x form 2010 , in the appropriate columns of that summary. 1040x form 2010 4. 1040x form 2010 Employee Compensation Record This record shows the following information. 1040x form 2010 The number of hours Henry's employee worked in a pay period. 1040x form 2010 The employee's total pay for the period. 1040x form 2010 The deductions Henry withheld in figuring the employee's net pay. 1040x form 2010 The monthly gross payroll. 1040x form 2010 Henry carries the January gross payroll ($520) to the Annual Summary. 1040x form 2010 5. 1040x form 2010 Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. 1040x form 2010 He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. 1040x form 2010 He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. 1040x form 2010 As in the journal, he keeps each major expense in a separate column. 1040x form 2010 Henry carries the cash receipts total shown in the annual summary ($47,440. 1040x form 2010 9