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Free Tax Filing For State And Federal

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Free Tax Filing For State And Federal

Free tax filing for state and federal 28. Free tax filing for state and federal   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. Free tax filing for state and federal  The 2013 rate for business use of a vehicle is 56½ cents per mile. Free tax filing for state and federal Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). Free tax filing for state and federal You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Free tax filing for state and federal This chapter covers the following topics. Free tax filing for state and federal Deductions subject to the 2% limit. Free tax filing for state and federal Deductions not subject to the 2% limit. Free tax filing for state and federal Expenses you cannot deduct. Free tax filing for state and federal You must keep records to verify your deductions. Free tax filing for state and federal You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. Free tax filing for state and federal For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. Free tax filing for state and federal Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). Free tax filing for state and federal You can claim the amount of expenses that is more than 2% of your adjusted gross income. Free tax filing for state and federal You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Free tax filing for state and federal Your adjusted gross income is the amount on Form 1040, line 38. Free tax filing for state and federal Generally, you apply the 2% limit after you apply any other deduction limit. Free tax filing for state and federal For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. Free tax filing for state and federal Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). Free tax filing for state and federal Unreimbursed employee expenses (line 21). Free tax filing for state and federal Tax preparation fees (line 22). Free tax filing for state and federal Other expenses (line 23). Free tax filing for state and federal Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Free tax filing for state and federal An expense is ordinary if it is common and accepted in your trade, business, or profession. Free tax filing for state and federal An expense is necessary if it is appropriate and helpful to your business. Free tax filing for state and federal An expense does not have to be required to be considered necessary. Free tax filing for state and federal Examples of unreimbursed employee expenses are listed next. Free tax filing for state and federal The list is followed by discussions of additional unreimbursed employee expenses. Free tax filing for state and federal Business bad debt of an employee. Free tax filing for state and federal Education that is work related. Free tax filing for state and federal (See chapter 27. Free tax filing for state and federal ) Legal fees related to your job. Free tax filing for state and federal Licenses and regulatory fees. Free tax filing for state and federal Malpractice insurance premiums. Free tax filing for state and federal Medical examinations required by an employer. Free tax filing for state and federal Occupational taxes. Free tax filing for state and federal Passport for a business trip. Free tax filing for state and federal Subscriptions to professional journals and trade magazines related to your work. Free tax filing for state and federal Travel, transportation, entertainment, and gifts related to your work. Free tax filing for state and federal (See chapter 26. Free tax filing for state and federal ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Free tax filing for state and federal Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. Free tax filing for state and federal Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Free tax filing for state and federal For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. Free tax filing for state and federal Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Free tax filing for state and federal Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Free tax filing for state and federal Lobbying and political activities. Free tax filing for state and federal   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Free tax filing for state and federal See Dues used for lobbying under Nondeductible Expenses, later. Free tax filing for state and federal Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Free tax filing for state and federal If you file Form 1040A, you can deduct these expenses on line 16. Free tax filing for state and federal If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Free tax filing for state and federal However, neither spouse can deduct more than $250 of his or her qualified expenses. Free tax filing for state and federal Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Free tax filing for state and federal You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Free tax filing for state and federal The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Free tax filing for state and federal See Publication 587 for more detailed information and a worksheet. Free tax filing for state and federal Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Free tax filing for state and federal You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Free tax filing for state and federal Employment and outplacement agency fees. Free tax filing for state and federal   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Free tax filing for state and federal Employer pays you back. Free tax filing for state and federal   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Free tax filing for state and federal (See Recoveries in chapter 12. Free tax filing for state and federal ) Employer pays the employment agency. Free tax filing for state and federal   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Free tax filing for state and federal Résumé. Free tax filing for state and federal   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Free tax filing for state and federal Travel and transportation expenses. Free tax filing for state and federal   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Free tax filing for state and federal You can deduct the travel expenses if the trip is primarily to look for a new job. Free tax filing for state and federal The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Free tax filing for state and federal   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Free tax filing for state and federal   You can choose to use the standard mileage rate to figure your car expenses. Free tax filing for state and federal The 2013 rate for business use of a vehicle is 56½ cents per mile. Free tax filing for state and federal See chapter 26 for more information. Free tax filing for state and federal Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Free tax filing for state and federal Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Free tax filing for state and federal If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Free tax filing for state and federal Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Free tax filing for state and federal If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Free tax filing for state and federal Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Free tax filing for state and federal You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Free tax filing for state and federal However, you cannot deduct the cost of travel as a form of education. Free tax filing for state and federal Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Free tax filing for state and federal You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Free tax filing for state and federal For more information about depreciation, see Publication 946. Free tax filing for state and federal Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Free tax filing for state and federal You can also deduct assessments for benefit payments to unemployed union members. Free tax filing for state and federal However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Free tax filing for state and federal Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. Free tax filing for state and federal You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Free tax filing for state and federal See Lobbying Expenses under Nondeductible Expenses, later. Free tax filing for state and federal Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Free tax filing for state and federal You must wear them as a condition of your employment. Free tax filing for state and federal The clothes are not suitable for everyday wear. Free tax filing for state and federal It is not enough that you wear distinctive clothing. Free tax filing for state and federal The clothing must be specifically required by your employer. Free tax filing for state and federal Nor is it enough that you do not, in fact, wear your work clothes away from work. Free tax filing for state and federal The clothing must not be suitable for taking the place of your regular clothing. Free tax filing for state and federal Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Free tax filing for state and federal ). Free tax filing for state and federal Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Free tax filing for state and federal However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Free tax filing for state and federal Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Free tax filing for state and federal Protective clothing. Free tax filing for state and federal   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Free tax filing for state and federal   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Free tax filing for state and federal Military uniforms. Free tax filing for state and federal   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Free tax filing for state and federal However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Free tax filing for state and federal In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Free tax filing for state and federal   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Free tax filing for state and federal   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Free tax filing for state and federal Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. Free tax filing for state and federal Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Free tax filing for state and federal These fees include the cost of tax preparation software programs and tax publications. Free tax filing for state and federal They also include any fee you paid for electronic filing of your return. Free tax filing for state and federal Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. Free tax filing for state and federal On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Free tax filing for state and federal You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. Free tax filing for state and federal Some of these other expenses are explained in the following discussions. Free tax filing for state and federal If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. Free tax filing for state and federal Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Free tax filing for state and federal Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Free tax filing for state and federal First report the loss in Section B of Form 4684, Casualties and Thefts. Free tax filing for state and federal You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Free tax filing for state and federal To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free tax filing for state and federal For other casualty and theft losses, see chapter 25. Free tax filing for state and federal Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Free tax filing for state and federal Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Free tax filing for state and federal The fees are deductible in the year paid. Free tax filing for state and federal Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Free tax filing for state and federal You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Free tax filing for state and federal But if you work as an employee and also use the computer in that work, see Publication 946. Free tax filing for state and federal Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Free tax filing for state and federal Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Free tax filing for state and federal The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Free tax filing for state and federal For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Free tax filing for state and federal Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Free tax filing for state and federal But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Free tax filing for state and federal You must add the fee to the cost of the property. Free tax filing for state and federal You cannot deduct the fee you pay to a broker to sell securities. Free tax filing for state and federal You can use the fee only to figure gain or loss from the sale. Free tax filing for state and federal See the Instructions for Form 8949 for information on how to report the fee. Free tax filing for state and federal Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Free tax filing for state and federal A hobby is not a business because it is not carried on to make a profit. Free tax filing for state and federal See Activity not for profit in chapter 12 under Other Income. Free tax filing for state and federal Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Free tax filing for state and federal Deductions of pass-through entities are passed through to the partners or shareholders. Free tax filing for state and federal The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Free tax filing for state and federal Example. Free tax filing for state and federal You are a member of an investment club that is formed solely to invest in securities. Free tax filing for state and federal The club is treated as a partnership. Free tax filing for state and federal The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Free tax filing for state and federal In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Free tax filing for state and federal However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Free tax filing for state and federal Publicly offered mutual funds. Free tax filing for state and federal   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Free tax filing for state and federal A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Free tax filing for state and federal   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Free tax filing for state and federal This net figure is the amount you report on your return as income. Free tax filing for state and federal You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Free tax filing for state and federal Information returns. Free tax filing for state and federal   You should receive information returns from pass-through entities. Free tax filing for state and federal Partnerships and S corporations. Free tax filing for state and federal   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. Free tax filing for state and federal Nonpublicly offered mutual funds. Free tax filing for state and federal   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. Free tax filing for state and federal You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Free tax filing for state and federal Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Free tax filing for state and federal Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Free tax filing for state and federal You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Free tax filing for state and federal You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. Free tax filing for state and federal You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). Free tax filing for state and federal See Tax Preparation Fees , earlier. Free tax filing for state and federal Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. Free tax filing for state and federal Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Free tax filing for state and federal If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Free tax filing for state and federal If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Free tax filing for state and federal Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. Free tax filing for state and federal Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Free tax filing for state and federal You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Free tax filing for state and federal Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Free tax filing for state and federal These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Free tax filing for state and federal Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Free tax filing for state and federal For more information about IRAs, see chapter 17. Free tax filing for state and federal Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Free tax filing for state and federal They are not subject to the 2% limit. Free tax filing for state and federal Report these items on Schedule A (Form 1040), line 28. Free tax filing for state and federal List of Deductions Each of the following items is discussed in detail after the list (except where indicated). Free tax filing for state and federal Amortizable premium on taxable bonds. Free tax filing for state and federal Casualty and theft losses from income- producing property. Free tax filing for state and federal Federal estate tax on income in respect of a decedent. Free tax filing for state and federal Gambling losses up to the amount of gambling winnings. Free tax filing for state and federal Impairment-related work expenses of persons with disabilities. Free tax filing for state and federal Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Free tax filing for state and federal Losses from Ponzi-type investment schemes. Free tax filing for state and federal See Losses from Ponzi-type investment schemes under Theft in chapter 25. Free tax filing for state and federal Repayments of more than $3,000 under a claim of right. Free tax filing for state and federal Unrecovered investment in an annuity. Free tax filing for state and federal Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Free tax filing for state and federal You can elect to amortize the premium on taxable bonds. Free tax filing for state and federal The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Free tax filing for state and federal Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. Free tax filing for state and federal For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. Free tax filing for state and federal Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Free tax filing for state and federal First, report the loss in Form 4684, Section B. Free tax filing for state and federal You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. Free tax filing for state and federal To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free tax filing for state and federal For more information on casualty and theft losses, see chapter 25. Free tax filing for state and federal Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Free tax filing for state and federal Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Free tax filing for state and federal See Publication 559 for more information. Free tax filing for state and federal Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Free tax filing for state and federal You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Free tax filing for state and federal You cannot deduct gambling losses that are more than your winnings. Free tax filing for state and federal You cannot reduce your gambling winnings by your gambling losses and report the difference. Free tax filing for state and federal You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Free tax filing for state and federal Therefore, your records should show your winnings separately from your losses. Free tax filing for state and federal Diary of winnings and losses. Free tax filing for state and federal You must keep an accurate diary or similar record of your losses and winnings. Free tax filing for state and federal Your diary should contain at least the following information. Free tax filing for state and federal The date and type of your specific wager or wagering activity. Free tax filing for state and federal The name and address or location of the gambling establishment. Free tax filing for state and federal The names of other persons present with you at the gambling establishment. Free tax filing for state and federal The amount(s) you won or lost. Free tax filing for state and federal See Publication 529 for more information. Free tax filing for state and federal Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Free tax filing for state and federal Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. Free tax filing for state and federal Self-employed. Free tax filing for state and federal   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Free tax filing for state and federal Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. Free tax filing for state and federal It is not subject to the passive activity limitations. Free tax filing for state and federal Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. Free tax filing for state and federal See Repayments in chapter 12 for more information. Free tax filing for state and federal Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Free tax filing for state and federal If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Free tax filing for state and federal See chapter 10 for more information about the tax treatment of pensions and annuities. Free tax filing for state and federal Nondeductible Expenses Examples of nondeductible expenses are listed next. Free tax filing for state and federal The list is followed by discussions of additional nondeductible expenses. Free tax filing for state and federal List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. Free tax filing for state and federal Burial or funeral expenses, including the cost of a cemetery lot. Free tax filing for state and federal Capital expenses. Free tax filing for state and federal Fees and licenses, such as car licenses, marriage licenses, and dog tags. Free tax filing for state and federal Hobby losses, but see Hobby Expenses , earlier. Free tax filing for state and federal Home repairs, insurance, and rent. Free tax filing for state and federal Illegal bribes and kickbacks. Free tax filing for state and federal See Bribes and kickbacks in chapter 11 of Publication 535. Free tax filing for state and federal Losses from the sale of your home, furniture, personal car, etc. Free tax filing for state and federal Personal disability insurance premiums. Free tax filing for state and federal Personal, living, or family expenses. Free tax filing for state and federal The value of wages never received or lost vacation time. Free tax filing for state and federal Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. Free tax filing for state and federal See chapter 37. Free tax filing for state and federal Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Free tax filing for state and federal These include qualification and registration fees for primary elections. Free tax filing for state and federal Legal fees. Free tax filing for state and federal   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Free tax filing for state and federal Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Free tax filing for state and federal Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Free tax filing for state and federal This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Free tax filing for state and federal You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Free tax filing for state and federal Dues paid to airline, hotel, and luncheon clubs are not deductible. Free tax filing for state and federal Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Free tax filing for state and federal If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. Free tax filing for state and federal Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Free tax filing for state and federal This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Free tax filing for state and federal Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Free tax filing for state and federal Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Free tax filing for state and federal Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Free tax filing for state and federal However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Free tax filing for state and federal See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. Free tax filing for state and federal Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Free tax filing for state and federal Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Free tax filing for state and federal You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Free tax filing for state and federal See chapter 18 for information on alimony. Free tax filing for state and federal Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Free tax filing for state and federal These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Free tax filing for state and federal Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Free tax filing for state and federal Dues used for lobbying. Free tax filing for state and federal   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Free tax filing for state and federal See Lobbying Expenses in Publication 529 for information on exceptions. Free tax filing for state and federal Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Free tax filing for state and federal However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free tax filing for state and federal See chapter 25. Free tax filing for state and federal Example. Free tax filing for state and federal A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free tax filing for state and federal The diamond falls from the ring and is never found. Free tax filing for state and federal The loss of the diamond is a casualty. Free tax filing for state and federal Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Free tax filing for state and federal See chapter 26 for information on deductible expenses while traveling away from home. Free tax filing for state and federal Meals While Working Late You cannot deduct the cost of meals while working late. Free tax filing for state and federal However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. Free tax filing for state and federal See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. Free tax filing for state and federal Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Free tax filing for state and federal Custody of children. Free tax filing for state and federal Breach of promise to marry suit. Free tax filing for state and federal Civil or criminal charges resulting from a personal relationship. Free tax filing for state and federal Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. Free tax filing for state and federal Preparation of a title (or defense or perfection of a title). Free tax filing for state and federal Preparation of a will. Free tax filing for state and federal Property claims or property settlement in a divorce. Free tax filing for state and federal You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Free tax filing for state and federal Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Free tax filing for state and federal Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Free tax filing for state and federal Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Free tax filing for state and federal Accounting certificate fees paid for the initial right to practice accounting. Free tax filing for state and federal Bar exam fees and incidental expenses in securing initial admission to the bar. Free tax filing for state and federal Medical and dental license fees paid to get initial licensing. Free tax filing for state and federal Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Free tax filing for state and federal Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Free tax filing for state and federal Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Free tax filing for state and federal Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Free tax filing for state and federal You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Free tax filing for state and federal Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Free tax filing for state and federal You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. Free tax filing for state and federal If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. Free tax filing for state and federal Example. Free tax filing for state and federal During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. Free tax filing for state and federal In earning this income, you had total expenses of $500 during the year. Free tax filing for state and federal You cannot identify the amount of each expense item that is for each income item. Free tax filing for state and federal Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. Free tax filing for state and federal You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). Free tax filing for state and federal Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. Free tax filing for state and federal See chapter 26 for more information on deductible travel expenses. Free tax filing for state and federal Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. Free tax filing for state and federal However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. Free tax filing for state and federal Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. Free tax filing for state and federal Prev  Up  Next   Home   More Online Publications
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Understanding Your CP76 Notice

We are allowing your Earned Income Credit as claimed on your tax return. You will receive any expected refund in 8 weeks provided you owe no other taxes or legal debts we are required to collect.


What you need to do

  • You don’t need to take further action.

You may want to

  • Keep a copy of this notice for your records

Answers to Common Questions

What if I don't receive my refund within 8 weeks?
Call us for assistance at the toll-free telephone number listed in the top right corner of your notice, if you haven't received your refund within 8 weeks.


Tips for next year

Consider filing your taxes electronically. Filing online can help you to avoid mistakes and to find credits and deductions for which you may qualify. In many cases you can file electronically for free. Learn more about e-file.

Page Last Reviewed or Updated: 07-Mar-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Free Tax Filing For State And Federal

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