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Free Income Tax Filing

Free income tax filing 7. Free income tax filing   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. Free income tax filing Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. Free income tax filing You must determine gross profit before you can deduct any business expenses. Free income tax filing These expenses are discussed in chapter 8. Free income tax filing If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. Free income tax filing Businesses that sell products. Free income tax filing   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. Free income tax filing Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). Free income tax filing Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. Free income tax filing   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). Free income tax filing The result is the gross profit from your business. Free income tax filing Businesses that sell services. Free income tax filing   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. Free income tax filing Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). Free income tax filing Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. Free income tax filing Illustration. Free income tax filing   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. Free income tax filing Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. Free income tax filing Gross receipts. Free income tax filing   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. Free income tax filing You may find it helpful to use cash registers to keep track of receipts. Free income tax filing You should also use a proper invoicing system and keep a separate bank account for your business. Free income tax filing Sales tax collected. Free income tax filing   Check to make sure your records show the correct sales tax collected. Free income tax filing   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. Free income tax filing   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. Free income tax filing Inventory at beginning of year. Free income tax filing   Compare this figure with last year's ending inventory. Free income tax filing The two amounts should usually be the same. Free income tax filing Purchases. Free income tax filing   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. Free income tax filing ) be sure to remove them from the cost of goods sold. Free income tax filing For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. Free income tax filing Inventory at end of year. Free income tax filing   Check to make sure your procedures for taking inventory are adequate. Free income tax filing These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. Free income tax filing   Use inventory forms and adding machine tapes as the only evidence for your inventory. Free income tax filing Inventory forms are available at office supply stores. Free income tax filing These forms have columns for recording the description, quantity, unit price, and value of each inventory item. Free income tax filing Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. Free income tax filing These forms will help satisfy you that the total inventory is accurate. Free income tax filing They will also provide you with a permanent record to support its validity. Free income tax filing   Inventories are discussed in chapter 2. Free income tax filing Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. Free income tax filing First, divide gross profit by net receipts. Free income tax filing The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. Free income tax filing Next, compare this percentage to your markup policy. Free income tax filing Little or no difference between these two percentages shows that your gross profit figure is accurate. Free income tax filing A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. Free income tax filing You should determine the reason for the difference. Free income tax filing Example. Free income tax filing   Joe Able operates a retail business. Free income tax filing On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. Free income tax filing The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. Free income tax filing His cost of goods sold is $200,000. Free income tax filing This results in a gross profit of $100,000 ($300,000 − $200,000). Free income tax filing To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). Free income tax filing The resulting 331/3% confirms his markup percentage of 331/3%. Free income tax filing Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. Free income tax filing The result is gross business income. Free income tax filing If you use Schedule C-EZ, include the income on line 1 of the schedule. Free income tax filing Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. Free income tax filing Prev  Up  Next   Home   More Online Publications
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The Free Income Tax Filing

Free income tax filing Index A Actuarial Tables, Actuarial Tables How to use, How To Use Actuarial Tables Unisex, Unisex Annuity Tables Adjustments to total cost, Adjustments Annuity starting date, The annuity starting date Assistance (see Tax help) D Death benefit exclusion, Death benefit exclusion. Free income tax filing E Election Post-June 1986 contributions, Contributions made both before July 1986 and after June 1986. Free income tax filing , Annuity received after June 30, 1986. Free income tax filing Pre-July 1986 contributions, Contributions made both before July 1986 and after June 1986. Free income tax filing Employment abroad, Foreign employment. Free income tax filing Exclusion limited to net cost, Exclusion limited to net cost. Free income tax filing Exclusion not limited to net cost, Exclusion not limited to net cost. Free income tax filing Exclusion ratio, Step 3. Free income tax filing Expected return, Expected Return F Fixed period annuity, Types of pensions and annuities. Free income tax filing , Fixed period annuity. Free income tax filing Foreign employment, Foreign employment. Free income tax filing Free tax services, Free help with your tax return. Free income tax filing G General Rule Who must use the, Who must use the General Rule. Free income tax filing H Help (see Tax help) Help from IRS, Help from IRS. Free income tax filing , Request for a ruling. Free income tax filing , Free IRS help. Free income tax filing , Requesting a Ruling on Taxation of Annuity I Increase in payments, Increase in annuity payments. Free income tax filing Investment in the contract, Investment in the Contract J Joint and survivor annuities, Types of pensions and annuities. Free income tax filing , Joint and survivor annuities. Free income tax filing N Net cost, Net cost. Free income tax filing Nonqualified employee plans, General Information P Part-year payments, Part-year payments. Free income tax filing Periodic payments, taxation of, Taxation of Periodic Payments Publications (see Tax help) Q Qualified plans, Introduction R Refund feature, Refund feature. Free income tax filing Ruling request, Request for a ruling. Free income tax filing , Requesting a Ruling on Taxation of Annuity S Single life annuity, Single life annuity. Free income tax filing Survivor annuities, Different payments to survivor. Free income tax filing T Tax help, How To Get Tax Help Taxable part of annuity How to compute the, Computation Under the General Rule Worksheets, Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Free income tax filing 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity, Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Free income tax filing 72-6(d)(6) Election For Joint and Survivor Annuity TTY/TDD information, How To Get Tax Help Types of pensions and annuities, Types of pensions and annuities. Free income tax filing V Variable annuities, Types of pensions and annuities. Free income tax filing , Variable annuities. Free income tax filing W Withholding of tax, Withholding tax and estimated tax. Free income tax filing Prev  Up     Home   More Online Publications