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Free 2008 Tax Software

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Free 2008 Tax Software

Free 2008 tax software Publication 721 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Free 2008 tax software Tax questions. Free 2008 tax software Useful Items - You may want to see: Reminders Future developments. Free 2008 tax software  For the latest information about developments related to Publication 721, such as legislation enacted after it was published, go to www. Free 2008 tax software IRS. Free 2008 tax software gov/pub721. Free 2008 tax software Phased retirement. Free 2008 tax software   The new phased retirement program was signed into law by the Moving Ahead for Progress in the 21st Century Act and will be available for retirement eligible individuals once the regulations for this program are effective. Free 2008 tax software This new program will allow eligible employees to begin receiving annuity payments while working part-time. Free 2008 tax software For more information, go to the Office of Personnel Management (OPM) website at www. Free 2008 tax software opm. Free 2008 tax software gov. Free 2008 tax software Roth Thrift Savings Plan (TSP) balance. Free 2008 tax software  You may be able to contribute to a designated Roth account through the TSP known as the Roth TSP. Free 2008 tax software Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Free 2008 tax software Qualified distributions from a Roth TSP are not included in your income. Free 2008 tax software See Thrift Savings Plan in Part II for more information. Free 2008 tax software Rollovers. Free 2008 tax software  You can roll over certain amounts from the CSRS, FERS, or TSP, to a tax-sheltered annuity plan (403(b) plan) or a state or local government section 457 deferred compensation plan. Free 2008 tax software See Rollover Rules in Part II. Free 2008 tax software Rollovers by surviving spouse. Free 2008 tax software  You may be able to roll over a distribution you receive as the surviving spouse of a deceased employee or retiree into a qualified retirement plan or an IRA. Free 2008 tax software See Rollover Rules in Part II. Free 2008 tax software Thrift Savings Plan (TSP) beneficiary participant accounts. Free 2008 tax software  If you are the spouse beneficiary of a decedent's TSP account, you have the option of leaving the death benefit payment in a TSP account in your own name (a beneficiary participant account). Free 2008 tax software The amounts in the beneficiary participant account are neither taxable or reportable until you choose to make a withdrawal, or otherwise receive a distribution from the account. Free 2008 tax software Benefits for public safety officer's survivors. Free 2008 tax software  A survivor annuity received by the spouse, former spouse, or child of a public safety officer killed in the line of duty generally will be excluded from the recipient's income. Free 2008 tax software For more information, see Dependents of public safety officers in Part IV. Free 2008 tax software Uniformed services Thrift Savings Plan (TSP) accounts. Free 2008 tax software  If you have a uniformed services TSP account, it may include contributions from combat zone pay. Free 2008 tax software This pay is tax-exempt and contributions attributable to that pay are tax-exempt when they are distributed from the uniformed services TSP account. Free 2008 tax software However, any earnings on those contributions are subject to tax when they are distributed. Free 2008 tax software The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. Free 2008 tax software If you have both a civilian and a uniformed services TSP account, you should apply the rules discussed in this publication separately to each account. Free 2008 tax software You can get more information from the TSP website, www. Free 2008 tax software tsp. Free 2008 tax software gov, or the TSP Service Office. Free 2008 tax software Photographs of missing children. Free 2008 tax software  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free 2008 tax software Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free 2008 tax software You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free 2008 tax software Introduction This publication explains how the federal income tax rules apply to civil service retirement benefits received by retired federal employees (including those disabled) or their survivors. Free 2008 tax software These benefits are paid primarily under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). Free 2008 tax software Tax rules for annuity benefits. Free 2008 tax software   Part of the annuity benefits you receive is a tax-free recovery of your contributions to the CSRS or FERS. Free 2008 tax software The rest of your benefits are taxable. Free 2008 tax software If your annuity starting date is after November 18, 1996, you must use the Simplified Method to figure the taxable and tax-free parts. Free 2008 tax software If your annuity starting date is before November 19, 1996, you generally could have chosen to use the Simplified Method or the General Rule. Free 2008 tax software See Part II, Rules for Retirees . Free 2008 tax software Thrift Savings Plan. Free 2008 tax software   The Thrift Savings Plan (TSP) provides federal employees with the same savings and tax benefits that many private employers offer their employees. Free 2008 tax software This plan is similar to private sector 401(k) plans. Free 2008 tax software You can defer tax on part of your pay by having it contributed to your traditional balance in the plan. Free 2008 tax software The contributions and earnings on them are not taxed until they are distributed to you. Free 2008 tax software Also the TSP offers a Roth TSP option. Free 2008 tax software Contributions to this type of balance are after tax and qualified distributions from the account are tax free. Free 2008 tax software See Thrift Savings Plan in Part II. Free 2008 tax software Comments and suggestions. Free 2008 tax software   We welcome your comments about this publication and your suggestions for future editions. Free 2008 tax software   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free 2008 tax software NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free 2008 tax software Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free 2008 tax software   You can send your comments from www. Free 2008 tax software irs. Free 2008 tax software gov/formspubs/. Free 2008 tax software Click on “More Information” and then on “Comment on Tax Forms and Publications”. Free 2008 tax software   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free 2008 tax software Ordering forms and publications. Free 2008 tax software   Visit www. Free 2008 tax software irs. Free 2008 tax software gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free 2008 tax software Internal Revenue Service 1201 N. Free 2008 tax software Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free 2008 tax software   If you have a tax question, check the information available on IRS. Free 2008 tax software gov or call 1-800-829-1040. Free 2008 tax software We cannot answer tax questions sent to either of the above addresses. Free 2008 tax software Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 939 General Rule for Pensions and Annuities Form (and Instructions) CSA 1099R Statement of Annuity Paid CSF 1099R Statement of Survivor Annuity Paid W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free 2008 tax software 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts See How To Get Tax Help near the end of this publication for information about getting publications and forms. Free 2008 tax software Prev  Up  Next   Home   More Online Publications
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Phone Forums - Retirement Plans

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Recently Held Phone Forums

An Overview of the 2013 Cumulative List of Changes in Plan Qualification- March 13, 2014 - Discussed the list of changes plan sponsors and practitioners must make to a plan before submitting determination letter applications beginning February 1, 2014 (Notice 2013-84). 
Handouts: An Overview of the 2013 Cumulative List of Changes in Plan Qualification presentation and Notice 2013-84

Upcoming Employee Plans Guidance Phone Forum - February 26, 2014 (scheduled previously for October 29, 2013) - Reviewed retirement benefit items on the 2013-2014 Priority Guidance Plan released on August 9 and other projects in EP Technical Guidance.
Handout: Employee Plans Technical Guidance

Ethical Standards of Employee Benefits Practice – What to Ask and Say to Clients, and What to Tell the IRS - January 29, 2014 (rebroadcast February 6, 2014) - Discussed an employee benefits practitioner’s ethical standards of conduct under Circular 230 for communications with clients and the IRS. 
Handout: Ethical Standards for Employee Benefits Practitioners

The Employee Plans Team Audit Program - November 21, 2013 -(transcript) - Discussed EPTA, our large case audit program. 
Handout: The Employee Plans Team Audit Program Presentation

How to prepare for an IRS Employee Plans Audit - August 29, 2013 - Two Sessions - Discussed latest information about the Employee Plans Examinations process.
Handout: Tools to Prepare for an Audit presentation

The Importance of Good Internal Controls - August 8, 2013 - (transcript) - Discussed how effective internal controls are essential to preventing costly mistakes that could jeopardize a retirement plan’s tax-favored status.
Handout: The Importance of Good Internal Controls presentation

EPCRS: Correcting 401(k) Plan Mistakes – Two Sessions - July 25, 2013 - (transcript) - Discussed correcting common 401(k) plan mistakes under EPCRS Revenue Procedure 2013-12, and how to find, fix and avoid them.
Handout: EPCRS: Correcting 401(k) Plan Mistakes presentation

What You Need to Know about the 403(b) Pre-Approved Plan Program - June 25, 2013 - (audio) - Discussed the upcoming 403(b) Pre-Approved Plan Program outlined in Revenue Procedure 2013-22.
Handout: 403(b) Pre-Approved Plan Program Presentation

403(b) Corrections and Examination Trends - May 23, 2013 - (audio) Discussed Revenue Procedure 2013-12 including guidance on correcting 403(b) plan failures and updates to the Employee Plans Compliance Resolution System.
Handout: 403(b) Plan Correction Issues Presentation

What You Need to Know About the IRS Final 401(k) Questionnaire Report and Next Steps - May 13, 2013 - Discussed significant findings and next steps (including outreach, guidance and compliance projects) and a new self-audit tool to help 401(k) plan sponsors avoid costly mistakes. 
Handout: Final 401(k) Questionnaire Report Presentation (Updated)

Defined Benefit Plan Update - April 23, 2013 - (transcript) - Discussed recent developments affecting defined benefit plans.
Handout: Defined Benefit Plan Update Presentation

International Issues Involving Retirement Plans in U.S. Territories  - March 21, 2013 - Discussed audit results and recurring issues of retirement plans in U.S. Territories, and Employee Plans’ 2013 fiscal year strategies and operating priorities.
Handout: International Issues Involving Retirement Plans in U.S. Territories Presentation

Overview of the 2012 Cumulative List of Plan Qualification Changes - February 28, 2013 - (audio) - Discussed the list of plan changes to by plan sponsors and practitioners submitting determination letter applications during the period beginning February 1, 2013 (Notice 2012-76).
Handout: Overview of the 2012 Cumulative List of Plan Qualification Changes Presentation

Employee Plans Compliance Resolution System Changes - February 21, 2013 - Session #1 & 2 - (audio) - Discussed Revenue Procedure 2013-12 and the various changes to the IRS correction programs.
Handout: EPCRS Changes Presentation

Ethical Standards for and Accountability of Practitioners Offering Tax Advice Relating to Employee Benefit Plans - February 13, 2013 (audio) - Discussed professional standards of conduct applicable to, and the accountability of, individuals that provide tax advice relating to employee benefit plans.  
Handout: Ethical Standards Presentation

Retirement plans can make loans, hardship distributions to Sandy victims - December 11, 2012 (audio)- Discussed Announcement 2012-44 and the options available to employees their families and plan sponsors.
Handout: Hurricane Sandy Relief Presentation

MAP-21: Changes to Segment Rates - September 27, 2012 - (audio) - Discussed the Moving Ahead for Progress in the 21st Century Act (MAP-21) and recently released related guidance.
Handout: MAP-21 Presentation

EPCRS: Correction of 401(k) Plan Mistakes (September 7, 2012) - (audio) - How to correct common mistakes in 401(k) plans.
Handouts: Correction Methods for 401(k) Failures Presentation

Lifetime Annuity Guidance (August 28, 2012) (Audio and Transcript) - Guidance designed to encourage lifetime annuity options for retirees. The presentation included Revenue Ruling 2012-3, Revenue Ruling 2012-4, and proposed regulations under sections 401(a)(9) and 417(e)(3) of the Code.
Handout: Lifetime Annuity Guidance Presentation

Operating Under the Written Plan Requirements and Common Issues Identified in 403(b) Plans (June 12, 2012) (transcript)- Frequent questions pertaining to the 403(b) written plan requirements and how the IRS is approaching the written plan requirement under audit.
Handouts: Operating Under the Written Plan Requirements and Common Issues Identified in 403(b) Plans Presentation

Governmental Plan Proposed Guidance (May 15, 2012) (transcript) - Proposed drafts of the general guidance on possible standards for determining if a retirement plan is a governmental plan under IRC section 414(d).

Indian Tribal Government Retirement Plans (April 24, 2012) - Possible standards for determining whether a plan of an Indian Tribal Government is a governmental plan within the meaning of section 414(d) of the Code.

EP Determination Letter Program Update (March 30, 2012) (transcript) - Important changes to the Employee Plans determination letter program.
Handout: EP Determination Letter Program Update Presentation

401(k) Questionnaire Interim Report IRS Phone Forum (March 6, 2012) (transcript) - 401(k) Questionnaire Interim Report, its next steps, and current issues.
Handout: 401(k) Questionnaire Interim Report Presentation

Funding-Based Benefit Restrictions - (February 23, 2012) (transcript)- funding-based benefit restrictions under IRC section 436.
Handout: Funding-Based Benefit Restrictions Presentation

Self Correction Program (SCP) and Closing Agreement Program (CAP) (November 30, 2011) (transcript) - current EPCRS issues, procedures and CAP sanctions
Handout: SCP and CAP Presentation

Determination Letter Issues Regarding Employee Stock Ownership Plans (October 28, 2011) (transcript) - technical issues affecting ESOPs and recurring issues noted in ESOP determination letter submissions
Handout: Determination Letter Issues Regarding Employee Stock Ownership Plans Presentation

Current Developments and Issues from the office of Employee Plans Rulings and Agreements (September 21, 2011) (transcript) - technical guidance hot topics and voluntary compliance applications
Handout: Current Developments and Issues Presentation

Participant Loans (September 12, 2011) (transcript) - treatment of loans as distributions, taxability and IRC §4975
Handout: Participants Loans Presentation
Helpful Links: The Fix Is In: Common Plan Mistakes - Participant Loans in 401(k) Plans; The Fix Is In: Common Plan Mistakes - Plan Loan Failures and Deemed Distributions;  Retirement Plans FAQs regarding Loans

EPCRS: Plan Correction Issues (August 25, 2011)  (transcript) - recurring issues found in EPCRS and tips to avoid common mistakes
Handout: EPCRS: Plan Correction Issues Presentation

Ethics for Employee Plans Practitioners (July 29, 2011) (transcript)- ethical standards of practice before the IRS applicable to employee benefits practitioners
Handout: Ethics for Employee Plans Practitioners Presentation

Funding Standards and Relief for Single and Multiemployer Plans (April 28, 2011) (transcript) - funding standards applicable to single and multiemployer pension plans
Handout: Funding Standards Presentation

Form 5330 - Completion and Processing Tidbits (March 24, 2011) (transcript) - proper completion and processing of the Form 5330, along with ways to avoid common mistakes
Handouts:

EP Technical Guidance (March 4, 2011) (transcript) - recent published guidance and updates on current IRS initiatives
Handout: EP Technical Guidance Presentation

In-Plan Roth Rollover Phone Forum (December 20, 2010) (Transcript) - recent guidance on in-plan Roth rollovers for 401(k) and 403(b) plans
Handout: In-Plan Roth Rollover Phone Forum Presentation

Hybrid Plans (November 23, 2010) (Transcript) - new hybrid plan regulations
Handouts:

Page Last Reviewed or Updated: 14-Mar-2014

The Free 2008 Tax Software

Free 2008 tax software 2. Free 2008 tax software   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. Free 2008 tax software Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. Free 2008 tax software Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. Free 2008 tax software Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. Free 2008 tax software The annual accounting period for your income tax return is called a tax year. Free 2008 tax software You can use one of the following tax years. Free 2008 tax software A calendar tax year. Free 2008 tax software A fiscal tax year. Free 2008 tax software Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Free 2008 tax software A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Free 2008 tax software Calendar tax year. Free 2008 tax software   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Free 2008 tax software   You must adopt the calendar tax year if any of the following apply. Free 2008 tax software You do not keep books. Free 2008 tax software You have no annual accounting period. Free 2008 tax software Your present tax year does not qualify as a fiscal year. Free 2008 tax software Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. Free 2008 tax software   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Free 2008 tax software For more information, see Change in tax year, later. Free 2008 tax software   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. Free 2008 tax software Fiscal tax year. Free 2008 tax software   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Free 2008 tax software 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. Free 2008 tax software   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. Free 2008 tax software   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. Free 2008 tax software Change in tax year. Free 2008 tax software   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. Free 2008 tax software See the Instructions for Form 1128 for exceptions. Free 2008 tax software If you qualify for an automatic approval request, a user fee is not required. Free 2008 tax software If you do not qualify for automatic approval, a ruling must be requested. Free 2008 tax software See the instructions for Form 1128 for information about user fees if you are requesting a ruling. Free 2008 tax software Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Free 2008 tax software Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. Free 2008 tax software You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. Free 2008 tax software After that, if you want to change your accounting method, you must generally get IRS approval. Free 2008 tax software See Change in Accounting Method, later. Free 2008 tax software Kinds of methods. Free 2008 tax software   Generally, you can use any of the following accounting methods. Free 2008 tax software Cash method. Free 2008 tax software An accrual method. Free 2008 tax software Special methods of accounting for certain items of income and expenses. Free 2008 tax software Combination method using elements of two or more of the above. Free 2008 tax software You must use the same accounting method to figure your taxable income and to keep your books. Free 2008 tax software Also, you must use an accounting method that clearly shows your income. Free 2008 tax software Business and personal items. Free 2008 tax software   You can account for business and personal items under different accounting methods. Free 2008 tax software For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Free 2008 tax software Two or more businesses. Free 2008 tax software   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. Free 2008 tax software They are separate and distinct only if you maintain complete and separate books and records for each business. Free 2008 tax software Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. Free 2008 tax software However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. Free 2008 tax software For more information, see Inventories, later. Free 2008 tax software Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. Free 2008 tax software If you receive property or services, you must include their fair market value in income. Free 2008 tax software Example. Free 2008 tax software On December 30, 2012, Mrs. Free 2008 tax software Sycamore sent you a check for interior decorating services you provided to her. Free 2008 tax software You received the check on January 2, 2013. Free 2008 tax software You must include the amount of the check in income for 2013. Free 2008 tax software Constructive receipt. Free 2008 tax software   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. Free 2008 tax software You do not need to have possession of it. Free 2008 tax software If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Free 2008 tax software Example. Free 2008 tax software Interest is credited to your bank account in December 2013. Free 2008 tax software You do not withdraw it or enter it into your passbook until 2014. Free 2008 tax software You must include it in your gross income for 2013. Free 2008 tax software Delaying receipt of income. Free 2008 tax software   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Free 2008 tax software You must report the income in the year the property is received or made available to you without restriction. Free 2008 tax software Example. Free 2008 tax software Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. Free 2008 tax software She was told in December that her payment was available. Free 2008 tax software At her request, she was not paid until January 2014. Free 2008 tax software She must include this payment in her 2013 income because it was constructively received in 2013. Free 2008 tax software Checks. Free 2008 tax software   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Free 2008 tax software Example. Free 2008 tax software Dr. Free 2008 tax software Redd received a check for $500 on December 31, 2013, from a patient. Free 2008 tax software She could not deposit the check in her business account until January 2, 2014. Free 2008 tax software She must include this fee in her income for 2013. Free 2008 tax software Debts paid by another person or canceled. Free 2008 tax software   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Free 2008 tax software If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Free 2008 tax software For more information, see Canceled Debt under Kinds of Income in chapter 5. Free 2008 tax software Repayment of income. Free 2008 tax software   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. Free 2008 tax software If the amount you repay is over $3,000, a special rule applies. Free 2008 tax software For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. Free 2008 tax software Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. Free 2008 tax software This includes business expenses for which you contest liability. Free 2008 tax software However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Free 2008 tax software Expenses paid in advance. Free 2008 tax software   You can deduct an expense you pay in advance only in the year to which it applies. Free 2008 tax software Example. Free 2008 tax software You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. Free 2008 tax software You can deduct $500 in 2013 and $500 in 2014. Free 2008 tax software Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Free 2008 tax software The purpose of an accrual method of accounting is to match income and expenses in the correct year. Free 2008 tax software Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. Free 2008 tax software Example. Free 2008 tax software You are a calendar year accrual method taxpayer. Free 2008 tax software You sold a computer on December 28, 2013. Free 2008 tax software You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. Free 2008 tax software You must include the amount received for the computer in your 2013 income. Free 2008 tax software Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. Free 2008 tax software Estimated income. Free 2008 tax software   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. Free 2008 tax software Change in payment schedule for services. Free 2008 tax software   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. Free 2008 tax software Advance payments for services. Free 2008 tax software   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. Free 2008 tax software However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. Free 2008 tax software However, you cannot postpone including any payment beyond that tax year. Free 2008 tax software   For more information, see Advance Payment for Services under Accrual Method in Publication 538. Free 2008 tax software That publication also explains special rules for reporting the following types of income. Free 2008 tax software Advance payments for service agreements. Free 2008 tax software Prepaid rent. Free 2008 tax software Advance payments for sales. Free 2008 tax software   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. Free 2008 tax software If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. Free 2008 tax software An agreement includes a gift certificate that can be redeemed for goods. Free 2008 tax software Treat amounts that are due and payable as amounts you received. Free 2008 tax software   You generally include an advance payment in income for the tax year in which you receive it. Free 2008 tax software However, you can use an alternative method. Free 2008 tax software For information about the alternative method, see Publication 538. Free 2008 tax software Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Free 2008 tax software The all-events test has been met. Free 2008 tax software The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Free 2008 tax software Economic performance has occurred. Free 2008 tax software Economic performance. Free 2008 tax software   You generally cannot deduct or capitalize a business expense until economic performance occurs. Free 2008 tax software If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Free 2008 tax software If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Free 2008 tax software An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Free 2008 tax software For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. Free 2008 tax software Example. Free 2008 tax software You are a calendar year taxpayer and use an accrual method of accounting. Free 2008 tax software You buy office supplies in December 2013. Free 2008 tax software You receive the supplies and the bill in December, but you pay the bill in January 2014. Free 2008 tax software You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. Free 2008 tax software Your office supplies may qualify as a recurring expense. Free 2008 tax software In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). Free 2008 tax software Keeping inventories. Free 2008 tax software   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. Free 2008 tax software If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. Free 2008 tax software For more information, see Inventories , later. Free 2008 tax software Special rule for related persons. Free 2008 tax software   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. Free 2008 tax software Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Free 2008 tax software If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. Free 2008 tax software   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Free 2008 tax software For a list of other related persons, see section 267 of the Internal Revenue Code. Free 2008 tax software Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Free 2008 tax software However, the following restrictions apply. Free 2008 tax software If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. Free 2008 tax software (See, however, Inventories, later. Free 2008 tax software ) You can use the cash method for all other items of income and expenses. Free 2008 tax software If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Free 2008 tax software If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Free 2008 tax software If you use a combination method that includes the cash method, treat that combination method as the cash method. Free 2008 tax software Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. Free 2008 tax software However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Free 2008 tax software These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Free 2008 tax software A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Free 2008 tax software A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Free 2008 tax software Qualifying taxpayer. Free 2008 tax software   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. Free 2008 tax software (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. Free 2008 tax software ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. Free 2008 tax software Qualifying small business taxpayer. Free 2008 tax software   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. Free 2008 tax software (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Free 2008 tax software ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Free 2008 tax software Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). Free 2008 tax software Business not owned or not in existence for 3 years. Free 2008 tax software   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. Free 2008 tax software If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. Free 2008 tax software Materials and supplies that are not incidental. Free 2008 tax software   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. Free 2008 tax software If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. Free 2008 tax software Changing accounting method. Free 2008 tax software   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. Free 2008 tax software See Change in Accounting Method, later. Free 2008 tax software More information. Free 2008 tax software    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Free 2008 tax software For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Free 2008 tax software Items included in inventory. Free 2008 tax software   If you are required to account for inventories, include the following items when accounting for your inventory. Free 2008 tax software Merchandise or stock in trade. Free 2008 tax software Raw materials. Free 2008 tax software Work in process. Free 2008 tax software Finished products. Free 2008 tax software Supplies that physically become a part of the item intended for sale. Free 2008 tax software Valuing inventory. Free 2008 tax software   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). Free 2008 tax software To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. Free 2008 tax software   Inventory valuation rules cannot be the same for all kinds of businesses. Free 2008 tax software The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Free 2008 tax software Your inventory practices must be consistent from year to year. Free 2008 tax software More information. Free 2008 tax software   For more information about inventories, see Publication 538. Free 2008 tax software Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. Free 2008 tax software Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Free 2008 tax software You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free 2008 tax software Activities subject to the uniform capitalization rules. Free 2008 tax software   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Free 2008 tax software Produce real or tangible personal property. Free 2008 tax software For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Free 2008 tax software Acquire property for resale. Free 2008 tax software Exceptions. Free 2008 tax software   These rules do not apply to the following property. Free 2008 tax software Personal property you acquire for resale if your average annual gross receipts are $10 million or less. Free 2008 tax software Property you produce if you meet either of the following conditions. Free 2008 tax software Your indirect costs of producing the property are $200,000 or less. Free 2008 tax software You use the cash method of accounting and do not account for inventories. Free 2008 tax software For more information, see Inventories, earlier. Free 2008 tax software Special Methods There are special methods of accounting for certain items of income or expense. Free 2008 tax software These include the following. Free 2008 tax software Amortization, discussed in chapter 8 of Publication 535, Business Expenses. Free 2008 tax software Bad debts, discussed in chapter 10 of Publication 535. Free 2008 tax software Depletion, discussed in chapter 9 of Publication 535. Free 2008 tax software Depreciation, discussed in Publication 946, How To Depreciate Property. Free 2008 tax software Installment sales, discussed in Publication 537, Installment Sales. Free 2008 tax software Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Free 2008 tax software A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. Free 2008 tax software To get approval, you must file Form 3115, Application for Change in Accounting Method. Free 2008 tax software You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. Free 2008 tax software You may have to pay a user fee. Free 2008 tax software For more information, see the form instructions. Free 2008 tax software Automatic change procedures. Free 2008 tax software   Certain taxpayers can presume to have IRS approval to change their method of accounting. Free 2008 tax software The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. Free 2008 tax software No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. Free 2008 tax software   Generally, you must use Form 3115 to request an automatic change. Free 2008 tax software For more information, see the Instructions for Form 3115. Free 2008 tax software Prev  Up  Next   Home   More Online Publications