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Free Tax Usa 2010

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Free Tax Usa 2010

Free tax usa 2010 Publication 596 - Introductory Material Table of Contents Future Developments What is the EIC? Can I Claim the EIC? Do I Need This Publication? Do I Have To Have A Child To Qualify For The EIC? How Do I Figure the Amount of EIC? How Can I Quickly Locate Specific information? Is There Help Online? What's New for 2013 Reminders Future Developments For the latest information about developments related to Publication 596, such as legislation enacted after it was published, go to www. Free tax usa 2010 irs. Free tax usa 2010 gov/pub596. Free tax usa 2010 What is the EIC? The earned income credit (EIC) is a tax credit for certain people who work and have earned income under $51,567. Free tax usa 2010 A tax credit usually means more money in your pocket. Free tax usa 2010 It reduces the amount of tax you owe. Free tax usa 2010 The EIC may also give you a refund. Free tax usa 2010 Can I Claim the EIC? To claim the EIC, you must meet certain rules. Free tax usa 2010 These rules are summarized in Table 1. Free tax usa 2010 Table 1. Free tax usa 2010 Earned Income Credit in a Nutshell First, you must meet all the rules in this column. Free tax usa 2010 Second, you must meet all the rules in one of these columns, whichever applies. Free tax usa 2010 Third, you must meet the rule in this column. Free tax usa 2010 Chapter 1. Free tax usa 2010  Rules for Everyone Chapter 2. Free tax usa 2010  Rules If You Have a Qualifying Child Chapter 3. Free tax usa 2010  Rules If You Do Not Have a Qualifying Child Chapter 4. Free tax usa 2010  Figuring and Claiming the EIC 1. Free tax usa 2010 Your adjusted gross income (AGI) must be less than:  • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free tax usa 2010 2. Free tax usa 2010 You must have a valid social security number. Free tax usa 2010   3. Free tax usa 2010 Your filing status cannot be Married filing separately. Free tax usa 2010   4. Free tax usa 2010 You must be a U. Free tax usa 2010 S. Free tax usa 2010 citizen or resident alien all year. Free tax usa 2010   5. Free tax usa 2010 You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). Free tax usa 2010   6. Free tax usa 2010 Your investment income must be $3,300 or less. Free tax usa 2010    7. Free tax usa 2010 You must have earned income. Free tax usa 2010 8. Free tax usa 2010 Your child must meet the relationship, age, residency, and joint return tests. Free tax usa 2010   9. Free tax usa 2010 Your qualifying child cannot be used by more than one person to claim the EIC. Free tax usa 2010   10. Free tax usa 2010 You cannot be a qualifying child of another person. Free tax usa 2010 11. Free tax usa 2010 You must be at least age 25 but under age 65. Free tax usa 2010    12. Free tax usa 2010 You cannot be the dependent of another person. Free tax usa 2010   13. Free tax usa 2010 You cannot be a qualifying child of another person. Free tax usa 2010   14. Free tax usa 2010 You must have lived in the United States more than half of the year. Free tax usa 2010 15. Free tax usa 2010 Your earned income must be less than:  • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or  • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free tax usa 2010 Do I Need This Publication? Certain people who file Form 1040 must use Worksheet 1 in this publication, instead of Step 2 in their Form 1040 instructions, when they are checking whether they can take the EIC. Free tax usa 2010 You are one of those people if any of the following statements are true for 2013. Free tax usa 2010 You are filing Schedule E (Form 1040). Free tax usa 2010 You are reporting income from the rental of personal property not used in a trade or business. Free tax usa 2010 You are reporting income on Form 1040, line 21, from Form 8814 (relating to election to report child's interest and dividends). Free tax usa 2010 You are reporting an amount on Form 1040, line 13, that includes an amount from Form 4797. Free tax usa 2010 If none of the statements above apply to you, your tax form instructions have all the information you need to find out if you can claim the EIC and to figure the amount of your EIC. Free tax usa 2010 You do not need this publication. Free tax usa 2010 But you can read it to find out whether you can take the EIC and to learn more about the EIC. Free tax usa 2010 Do I Have To Have A Child To Qualify For The EIC? No, you can qualify for the EIC without a qualifying child if you are at least age 25 but under age 65 and your earned income is less than $14,340 ($19,680 if married filing jointly). Free tax usa 2010 See chapter 3. Free tax usa 2010 How Do I Figure the Amount of EIC? If you can claim the EIC, you can either have the IRS figure the amount of your credit, or you can figure it yourself. Free tax usa 2010 To figure it yourself, you can complete a worksheet in the instructions for the form you file. Free tax usa 2010 To find out how to have the IRS figure it for you, see chapter 4. Free tax usa 2010 How Can I Quickly Locate Specific information? You can use the index to look up specific information. Free tax usa 2010 In most cases, index entries will point you to headings, tables, or a worksheet. Free tax usa 2010 Is There Help Online? Yes. Free tax usa 2010 You can use the EITC Assistant at www. Free tax usa 2010 irs. Free tax usa 2010 gov/eitc to find out if you may be eligible for the credit. Free tax usa 2010 The EITC Assistant is available in English and Spanish. Free tax usa 2010 What's New for 2013 Earned income amount is more. Free tax usa 2010 The maximum amount of income you can earn and still get the credit has increased. Free tax usa 2010 You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). Free tax usa 2010 Your adjusted gross income also must be less than the amount in the above list that applies to you. Free tax usa 2010 For details, see Rules 1 and 15. Free tax usa 2010 Investment income amount is more. Free tax usa 2010 The maximum amount of investment income you can have and still get the credit has increased to $3,300. Free tax usa 2010 See Rule 6—Your Investment Income Must Be $3,300 or Less . Free tax usa 2010 Reminders Increased EIC on certain joint returns. Free tax usa 2010 . Free tax usa 2010  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. Free tax usa 2010 As a result, the EIC table has different columns for married persons filing jointly than for everyone else. Free tax usa 2010 When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. Free tax usa 2010 Earned income credit has no effect on certain welfare benefits. Free tax usa 2010  Any refund you receive because of the EIC cannot be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. Free tax usa 2010 These programs include the following. Free tax usa 2010 Temporary Assistance for Needy Families (TANF). Free tax usa 2010 Medicaid. Free tax usa 2010 Supplemental security income (SSI). Free tax usa 2010 Supplemental Nutrition Assistance Program (food stamps). Free tax usa 2010 Low-income housing. Free tax usa 2010 In addition, when determining eligibility, the refund cannot be counted as a resource for at least 12 months after you receive it. Free tax usa 2010 Check with your local benefit coordinator to find out if your refund will affect your benefits. Free tax usa 2010 Do not overlook your state credit. Free tax usa 2010  If you can claim the EIC on your federal income tax return, you may be able to take a similar credit on your state or local income tax return. Free tax usa 2010 For a list of states that offer a state EIC, go to www. Free tax usa 2010 irs. Free tax usa 2010 gov/eitc. Free tax usa 2010 EIC questioned by IRS. Free tax usa 2010  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. Free tax usa 2010 We will tell you what documents to send us. Free tax usa 2010 These may include: birth certificates, school records, etc. Free tax usa 2010 The process of establishing your eligibility will delay your refund. Free tax usa 2010 Spanish version of Publication 596. Free tax usa 2010  You can order Publicación 596SP, Crédito por Ingreso del Trabajo, from the IRS. Free tax usa 2010 It is a Spanish translation of Publication 596. Free tax usa 2010 See How To Get Tax Help to find out how to order this and other IRS forms and publications. Free tax usa 2010 Photographs of missing children. Free tax usa 2010  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax usa 2010 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free tax usa 2010 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free tax usa 2010 Comments and suggestions. Free tax usa 2010  We welcome your comments about this publication and your suggestions for future editions. Free tax usa 2010 You can write to us at the following address:  Internal Revenue Service Individual Forms and Publications Branch 1111 Constitution Ave. Free tax usa 2010 NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Free tax usa 2010 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax usa 2010 You can send your comments from www. Free tax usa 2010 irs. Free tax usa 2010 gov/formspubs/. Free tax usa 2010 Click on “More Information” and then on “Comment on Tax Forms and Publications. Free tax usa 2010 ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free tax usa 2010 Ordering forms and publications. Free tax usa 2010  Visit www. Free tax usa 2010 irs. Free tax usa 2010 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free tax usa 2010  Internal Revenue Service 1201 N. Free tax usa 2010 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free tax usa 2010  If you have a tax question, check the information available on IRS. Free tax usa 2010 gov or call 1-800-829-1040. Free tax usa 2010 We cannot answer tax questions sent to either of the above addresses. Free tax usa 2010 Prev  Up  Next   Home   More Online Publications
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Understanding Your CP30A Notice

We reduced or removed the penalty for underpayment of estimated tax reported on your tax return.


What you need to do

  • Review the account information in your notice.
  • If there are discrepancies between our records and your records, and it appears that we removed or reduced your penalty in error, please return the refund with your explanation.

Answers to Common Questions

Why did you reduce or remove the penalty?
We reduced or eliminated the penalty because, according to our calculation, the penalty reported on your return is greater than the penalty actually due. Our calculation is based on information in our records at the time your return was processed. If your address is within a geographical area that was declared a federal disaster area, the reduction may be the result of an automatic waiver we applied.

What should I do if I disagree with the correction?
Call the toll free number listed in the top right corner of your notice. Explain to the assistor why you disagree with our correction. If we agree with your explanation, the assistor will tell you what to do next.

The notice says that I will receive a refund, but I haven't received it yet. When will I receive the refund?
Before we can issue a refund, we are required to collect (offset) any other taxes you may owe. Additionally, your refund may be offset to pay child support or state taxes you owe, or to pay any other debts you legally owe that we are required to collect. We also might not mail your refund if you have not filed all of the returns you are required to file. To check the status of your refund you may call the toll-free number listed in the top right corner of your notice.

Page Last Reviewed or Updated: 03-Mar-2014

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 Usa 2010

Free tax usa 2010 11. Free tax usa 2010   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Free tax usa 2010 Kickbacks. Free tax usa 2010 Form 1099-MISC. Free tax usa 2010 Exception. Free tax usa 2010 Tax preparation fees. Free tax usa 2010 Covered executive branch official. Free tax usa 2010 Exceptions to denial of deduction. Free tax usa 2010 Indirect political contributions. Free tax usa 2010 Type of deduction. Free tax usa 2010 Repayment—$3,000 or less. Free tax usa 2010 Repayment—over $3,000. Free tax usa 2010 Method 1. Free tax usa 2010 Method 2. Free tax usa 2010 Repayment does not apply. Free tax usa 2010 Year of deduction (or credit). Free tax usa 2010 Telephone. Free tax usa 2010 What's New Standard mileage rate. Free tax usa 2010  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Free tax usa 2010 5 cents per mile. Free tax usa 2010 For more information, see Car and truck expenses under Miscellaneous Expenses. Free tax usa 2010 Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Free tax usa 2010 Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Free tax usa 2010 Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Free tax usa 2010 If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Free tax usa 2010 To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Free tax usa 2010 Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Free tax usa 2010 For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Free tax usa 2010 Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Free tax usa 2010 If the expenses are substantiated, you can deduct the allowable amount on your tax return. Free tax usa 2010 Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Free tax usa 2010 For example, you can deduct 100% of the cost of meals on your business books and records. Free tax usa 2010 However, only 50% of these costs are allowed by law as a tax deduction. Free tax usa 2010 How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Free tax usa 2010 If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Free tax usa 2010 If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Free tax usa 2010 If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Free tax usa 2010 See Table 11-1 , Reporting Reimbursements. Free tax usa 2010 Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Free tax usa 2010 Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Free tax usa 2010 An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Free tax usa 2010 The advance is reasonably calculated not to exceed the amount of anticipated expenses. Free tax usa 2010 You make the advance within a reasonable period of time of your employee paying or incurring the expense. Free tax usa 2010 If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Free tax usa 2010 Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Free tax usa 2010 Adequate accounting. Free tax usa 2010   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Free tax usa 2010 They must give you documentary evidence of their travel, mileage, and other employee business expenses. Free tax usa 2010 This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Free tax usa 2010 Excess reimbursement or allowance. Free tax usa 2010   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Free tax usa 2010 The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Free tax usa 2010 Reasonable period of time. Free tax usa 2010   A reasonable period of time depends on the facts and circumstances. Free tax usa 2010 Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Free tax usa 2010 You give an advance within 30 days of the time the employee pays or incurs the expense. Free tax usa 2010 Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Free tax usa 2010 Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Free tax usa 2010 You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Free tax usa 2010 How to deduct. Free tax usa 2010   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Free tax usa 2010 Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Free tax usa 2010 If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Free tax usa 2010   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Free tax usa 2010 S. Free tax usa 2010 Corporation Income Tax Return. Free tax usa 2010 If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Free tax usa 2010 Table 11-1. Free tax usa 2010 Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Free tax usa 2010 Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Free tax usa 2010 Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Free tax usa 2010 Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Free tax usa 2010 The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Free tax usa 2010 Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Free tax usa 2010 The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Free tax usa 2010 A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Free tax usa 2010 No reimbursement plan The entire amount as wages in box 1. Free tax usa 2010 Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Free tax usa 2010 In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Free tax usa 2010 Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Free tax usa 2010 Federal rate. Free tax usa 2010   The federal rate can be figured using any one of the following methods. Free tax usa 2010 For car expenses: The standard mileage rate. Free tax usa 2010 A fixed and variable rate (FAVR). Free tax usa 2010 For per diem amounts: The regular federal per diem rate. Free tax usa 2010 The standard meal allowance. Free tax usa 2010 The high-low rate. Free tax usa 2010 Car allowance. Free tax usa 2010   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Free tax usa 2010 Beginning in 2013, the standard business mileage rate is 56. Free tax usa 2010 5 cents per mile. Free tax usa 2010   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Free tax usa 2010 This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Free tax usa 2010 ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Free tax usa 2010 ). Free tax usa 2010 For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Free tax usa 2010 irs. Free tax usa 2010 gov/irb/2010-51_IRB/ar14. Free tax usa 2010 html and Notice 2012-72, available at www. Free tax usa 2010 irs. Free tax usa 2010 gov/irb/2012-50_IRB/ar10. Free tax usa 2010 html. Free tax usa 2010 Per diem allowance. Free tax usa 2010   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Free tax usa 2010 Regular federal per diem rate. Free tax usa 2010   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Free tax usa 2010 It has two components: Lodging expense, and Meal and incidental expense (M&IE). Free tax usa 2010 The rates are different for different locations. Free tax usa 2010 Publication 1542 lists the rates in the continental United States. Free tax usa 2010 Standard meal allowance. Free tax usa 2010   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Free tax usa 2010 You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Free tax usa 2010 Internet access. Free tax usa 2010    Per diem rates are available on the Internet. Free tax usa 2010 You can access per diem rates at www. Free tax usa 2010 gsa. Free tax usa 2010 gov/perdiemrates. Free tax usa 2010 High-low method. Free tax usa 2010   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Free tax usa 2010 It eliminates the need to keep a current list of the per diem rate for each city. Free tax usa 2010   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Free tax usa 2010 All other areas have a per diem amount of $163 ($52 for M&IE). Free tax usa 2010 The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Free tax usa 2010   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Free tax usa 2010 The rate for all other locations increased to $170 ($52 for M&IE). Free tax usa 2010 For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Free tax usa 2010 However, you must use the same rate for all employees reimbursed under the high-low method. Free tax usa 2010   For more information about the high-low method, see Notice 2013-65, available at www. Free tax usa 2010 irs. Free tax usa 2010 gov/irb/2013-44_IRB/ar13. Free tax usa 2010 html. Free tax usa 2010 See Publication 1542 (available on the Internet at IRS. Free tax usa 2010 gov) for the current per diem rates for all locations. Free tax usa 2010 Reporting per diem and car allowances. Free tax usa 2010   The following discussion explains how to report per diem and car allowances. Free tax usa 2010 The manner in which you report them depends on how the allowance compares to the federal rate. Free tax usa 2010 See Table 11-1. Free tax usa 2010 Allowance less than or equal to the federal rate. Free tax usa 2010   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Free tax usa 2010 Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Free tax usa 2010 See How to deduct under Accountable Plans, earlier. Free tax usa 2010 Allowance more than the federal rate. Free tax usa 2010   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Free tax usa 2010   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Free tax usa 2010 Deduct it as travel expenses (as explained above). Free tax usa 2010 This part of the allowance is treated as reimbursed under an accountable plan. Free tax usa 2010   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Free tax usa 2010 Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Free tax usa 2010 This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Free tax usa 2010 Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Free tax usa 2010 The deduction limit applies even if you reimburse them for 100% of the expenses. Free tax usa 2010 Application of the 50% limit. Free tax usa 2010   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Free tax usa 2010 It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Free tax usa 2010 The deduction limit may also apply to meals you furnish on your premises to your employees. Free tax usa 2010 Related expenses. Free tax usa 2010   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Free tax usa 2010 Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Free tax usa 2010 However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Free tax usa 2010 Amount subject to 50% limit. Free tax usa 2010   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Free tax usa 2010 The per diem allowance. Free tax usa 2010 The federal rate for M&IE. Free tax usa 2010   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Free tax usa 2010 If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Free tax usa 2010 Meal expenses when subject to “hours of service” limits. Free tax usa 2010   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Free tax usa 2010   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Free tax usa 2010 De minimis (minimal) fringe benefit. Free tax usa 2010   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Free tax usa 2010 See Publication 15-B for additional information on de minimis fringe benefits. Free tax usa 2010 Company cafeteria or executive dining room. Free tax usa 2010   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Free tax usa 2010 This includes the cost of maintaining the facilities for providing the food and beverages. Free tax usa 2010 These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Free tax usa 2010 Employee activities. Free tax usa 2010   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Free tax usa 2010 The benefit must be primarily for your employees who are not highly compensated. Free tax usa 2010   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Free tax usa 2010 Owned a 10% or more interest in the business during the year or the preceding year. Free tax usa 2010 An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Free tax usa 2010 Received more than $115,000 in pay for the preceding year. Free tax usa 2010 You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Free tax usa 2010   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Free tax usa 2010 Meals or entertainment treated as compensation. Free tax usa 2010   The 50% limit does not apply to either of the following. Free tax usa 2010 Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Free tax usa 2010 Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Free tax usa 2010 Sales of meals or entertainment. Free tax usa 2010   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Free tax usa 2010 For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Free tax usa 2010 The 50% limit does not apply to this expense. Free tax usa 2010 Providing meals or entertainment to general public to promote goodwill. Free tax usa 2010   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Free tax usa 2010 The 50% limit does not apply to this expense. Free tax usa 2010 Director, stockholder, or employee meetings. Free tax usa 2010   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Free tax usa 2010 You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Free tax usa 2010 These expenses are subject to the 50% limit. Free tax usa 2010 Trade association meetings. Free tax usa 2010   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Free tax usa 2010 These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Free tax usa 2010 Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Free tax usa 2010 All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Free tax usa 2010 The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Free tax usa 2010 You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Free tax usa 2010 Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Free tax usa 2010 Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Free tax usa 2010 Advertising expenses. Free tax usa 2010   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Free tax usa 2010 Generally, you cannot deduct amounts paid to influence legislation (i. Free tax usa 2010 e. Free tax usa 2010 , lobbying). Free tax usa 2010 See Lobbying expenses , later. Free tax usa 2010   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Free tax usa 2010 For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Free tax usa 2010 S. Free tax usa 2010 Savings Bonds, or to participate in similar causes is usually deductible. Free tax usa 2010 Anticipated liabilities. Free tax usa 2010   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Free tax usa 2010 For example, assume you sold 1-year TV service contracts this year totaling $50,000. Free tax usa 2010 From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Free tax usa 2010 You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Free tax usa 2010 You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Free tax usa 2010 Bribes and kickbacks. Free tax usa 2010   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Free tax usa 2010 Such activity could result in criminal prosecution. Free tax usa 2010 Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Free tax usa 2010   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Free tax usa 2010 Meaning of “generally enforced. Free tax usa 2010 ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Free tax usa 2010 For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Free tax usa 2010 Kickbacks. Free tax usa 2010   A kickback is a payment for referring a client, patient, or customer. Free tax usa 2010 The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Free tax usa 2010 In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Free tax usa 2010   For example, the Yard Corporation is in the business of repairing ships. Free tax usa 2010 It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Free tax usa 2010 Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Free tax usa 2010 These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Free tax usa 2010 Form 1099-MISC. Free tax usa 2010   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Free tax usa 2010 See Form 1099-MISC for more information. Free tax usa 2010 Car and truck expenses. Free tax usa 2010   The costs of operating a car, truck, or other vehicle in your business are deductible. Free tax usa 2010 For more information on how to figure your deduction, see Publication 463. Free tax usa 2010 Charitable contributions. Free tax usa 2010   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Free tax usa 2010 If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Free tax usa 2010 However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Free tax usa 2010 See the Instructions for Form 1120 for more information. Free tax usa 2010 Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Free tax usa 2010 Example. Free tax usa 2010 You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Free tax usa 2010 The purpose of the ad was to encourage readers to buy your products. Free tax usa 2010 Your payment is not a charitable contribution. Free tax usa 2010 You can deduct it as an advertising expense. Free tax usa 2010 Example. Free tax usa 2010 You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Free tax usa 2010 Your payment is not a charitable contribution. Free tax usa 2010 You can deduct it as a business expense. Free tax usa 2010 See Publication 526 for a discussion of donated inventory, including capital gain property. Free tax usa 2010 Club dues and membership fees. Free tax usa 2010   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Free tax usa 2010 This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Free tax usa 2010 Exception. Free tax usa 2010   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Free tax usa 2010 Boards of trade. Free tax usa 2010 Business leagues. Free tax usa 2010 Chambers of commerce. Free tax usa 2010 Civic or public service organizations. Free tax usa 2010 Professional organizations such as bar associations and medical associations. Free tax usa 2010 Real estate boards. Free tax usa 2010 Trade associations. Free tax usa 2010 Credit card convenience fees. Free tax usa 2010   Credit card companies charge a fee to businesses who accept their cards. Free tax usa 2010 This fee when paid or incurred by the business can be deducted as a business expense. Free tax usa 2010 Damages recovered. Free tax usa 2010   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Free tax usa 2010 You must include this compensation in your income. Free tax usa 2010 However, you may be able to take a special deduction. Free tax usa 2010 The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Free tax usa 2010 The deduction is the smaller of the following. Free tax usa 2010 The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Free tax usa 2010 Your losses from the injury you have not deducted. Free tax usa 2010 Demolition expenses or losses. Free tax usa 2010   Amounts paid or incurred to demolish a structure are not deductible. Free tax usa 2010 These amounts are added to the basis of the land where the demolished structure was located. Free tax usa 2010 Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Free tax usa 2010 Education expenses. Free tax usa 2010   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Free tax usa 2010 See Education Expenses in chapter 2. Free tax usa 2010   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Free tax usa 2010 You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Free tax usa 2010 For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Free tax usa 2010   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Free tax usa 2010 This is true even if the education maintains or improves skills presently required in your business. Free tax usa 2010 For more information on education expenses, see Publication 970. Free tax usa 2010 Franchise, trademark, trade name. Free tax usa 2010   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Free tax usa 2010   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Free tax usa 2010   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Free tax usa 2010 Impairment-related expenses. Free tax usa 2010   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Free tax usa 2010   You are disabled if you have either of the following. Free tax usa 2010 A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Free tax usa 2010 A physical or mental impairment that substantially limits one or more of your major life activities. Free tax usa 2010   The expense qualifies as a business expense if all the following apply. Free tax usa 2010 Your work clearly requires the expense for you to satisfactorily perform that work. Free tax usa 2010 The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Free tax usa 2010 Their treatment is not specifically provided for under other tax law provisions. Free tax usa 2010 Example. Free tax usa 2010 You are blind. Free tax usa 2010 You must use a reader to do your work, both at and away from your place of work. Free tax usa 2010 The reader's services are only for your work. Free tax usa 2010 You can deduct your expenses for the reader as a business expense. Free tax usa 2010 Internet-related expenses. Free tax usa 2010   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Free tax usa 2010 If you are starting a business you may have to amortize these expenses as start-up costs. Free tax usa 2010 For more information about amortizing start-up and organizational costs, see chapter 8. Free tax usa 2010 Interview expense allowances. Free tax usa 2010   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Free tax usa 2010 You can deduct the reimbursements as a business expense. Free tax usa 2010 However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Free tax usa 2010 Legal and professional fees. Free tax usa 2010   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Free tax usa 2010 However, usually legal fees you pay to acquire business assets are not deductible. Free tax usa 2010 These costs are added to the basis of the property. Free tax usa 2010   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Free tax usa 2010 If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Free tax usa 2010 The result is the portion of the invoice attributable to business expenses. Free tax usa 2010 The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Free tax usa 2010   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Free tax usa 2010 However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Free tax usa 2010 See Publication 529, Miscellaneous Deductions. Free tax usa 2010 Tax preparation fees. Free tax usa 2010   The cost of hiring a tax professional, such as a C. Free tax usa 2010 P. Free tax usa 2010 A. Free tax usa 2010 , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Free tax usa 2010 Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Free tax usa 2010   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Free tax usa 2010 Licenses and regulatory fees. Free tax usa 2010   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Free tax usa 2010 Some licenses and fees may have to be amortized. Free tax usa 2010 See chapter 8 for more information. Free tax usa 2010 Lobbying expenses. Free tax usa 2010   Generally, lobbying expenses are not deductible. Free tax usa 2010 Lobbying expenses include amounts paid or incurred for any of the following activities. Free tax usa 2010 Influencing legislation. Free tax usa 2010 Participating in or intervening in any political campaign for, or against, any candidate for public office. Free tax usa 2010 Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Free tax usa 2010 Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Free tax usa 2010 Researching, preparing, planning, or coordinating any of the preceding activities. Free tax usa 2010   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Free tax usa 2010 For information on making this allocation, see section 1. Free tax usa 2010 162-28 of the regulations. Free tax usa 2010   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Free tax usa 2010 The organization conducts lobbying activities on matters of direct financial interest to your business. Free tax usa 2010 A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Free tax usa 2010   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Free tax usa 2010 Covered executive branch official. Free tax usa 2010   For purposes of this discussion, a covered executive branch official is any of the following. Free tax usa 2010 The President. Free tax usa 2010 The Vice President. Free tax usa 2010 Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Free tax usa 2010 Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Free tax usa 2010 Exceptions to denial of deduction. Free tax usa 2010   The general denial of the deduction does not apply to the following. Free tax usa 2010 Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Free tax usa 2010 An Indian tribal government is treated as a local council or similar governing body. Free tax usa 2010 Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Free tax usa 2010 Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Free tax usa 2010 Moving machinery. Free tax usa 2010   Generally, the cost of moving machinery from one city to another is a deductible expense. Free tax usa 2010 So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Free tax usa 2010 You can deduct the cost of installing the machinery in the new location. Free tax usa 2010 However, you must capitalize the costs of installing or moving newly purchased machinery. Free tax usa 2010 Outplacement services. Free tax usa 2010   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Free tax usa 2010 are deductible. Free tax usa 2010   The costs of outplacement services may cover more than one deduction category. Free tax usa 2010 For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Free tax usa 2010   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Free tax usa 2010 Penalties and fines. Free tax usa 2010   Penalties paid for late performance or nonperformance of a contract are generally deductible. Free tax usa 2010 For instance, you own and operate a construction company. Free tax usa 2010 Under a contract, you are to finish construction of a building by a certain date. Free tax usa 2010 Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Free tax usa 2010 You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Free tax usa 2010 These additional costs are deductible business expenses. Free tax usa 2010   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Free tax usa 2010 These fines or penalties include the following amounts. Free tax usa 2010 Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Free tax usa 2010 Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Free tax usa 2010 Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Free tax usa 2010 Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Free tax usa 2010   Examples of nondeductible penalties and fines include the following. Free tax usa 2010 Fines for violating city housing codes. Free tax usa 2010 Fines paid by truckers for violating state maximum highway weight laws. Free tax usa 2010 Fines for violating air quality laws. Free tax usa 2010 Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Free tax usa 2010   A fine or penalty does not include any of the following. Free tax usa 2010 Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Free tax usa 2010 Court costs or stenographic and printing charges. Free tax usa 2010 Compensatory damages paid to a government. Free tax usa 2010 Political contributions. Free tax usa 2010   Contributions or gifts paid to political parties or candidates are not deductible. Free tax usa 2010 In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Free tax usa 2010 Indirect political contributions. Free tax usa 2010   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Free tax usa 2010 Examples of nondeductible expenses include the following. Free tax usa 2010 Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Free tax usa 2010 Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Free tax usa 2010 Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Free tax usa 2010 Repairs. Free tax usa 2010   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Free tax usa 2010 Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Free tax usa 2010 Otherwise, the cost must be capitalized and depreciated. Free tax usa 2010 See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Free tax usa 2010   The cost of repairs includes the costs of labor, supplies, and certain other items. Free tax usa 2010 The value of your own labor is not deductible. Free tax usa 2010 Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Free tax usa 2010 Repayments. Free tax usa 2010   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Free tax usa 2010 Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Free tax usa 2010 Type of deduction. Free tax usa 2010   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Free tax usa 2010 For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Free tax usa 2010 If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Free tax usa 2010   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Free tax usa 2010 However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Free tax usa 2010 Repayment—$3,000 or less. Free tax usa 2010   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Free tax usa 2010 Repayment—over $3,000. Free tax usa 2010   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Free tax usa 2010 However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Free tax usa 2010 ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Free tax usa 2010 If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Free tax usa 2010 Method 1. Free tax usa 2010   Figure your tax for 2013 claiming a deduction for the repaid amount. Free tax usa 2010 Method 2. Free tax usa 2010   Figure your tax for 2013 claiming a credit for the repaid amount. Free tax usa 2010 Follow these steps. Free tax usa 2010 Figure your tax for 2013 without deducting the repaid amount. Free tax usa 2010 Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Free tax usa 2010 Subtract the tax in (2) from the tax shown on your return for the earlier year. Free tax usa 2010 This is the amount of your credit. Free tax usa 2010 Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Free tax usa 2010   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Free tax usa 2010   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Free tax usa 2010 R. Free tax usa 2010 C. Free tax usa 2010 1341” next to line 71. Free tax usa 2010 Example. Free tax usa 2010 For 2012, you filed a return and reported your income on the cash method. Free tax usa 2010 In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Free tax usa 2010 Your filing status in 2013 and 2012 is single. Free tax usa 2010 Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Free tax usa 2010 Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Free tax usa 2010 Repayment does not apply. Free tax usa 2010   This discussion does not apply to the following. Free tax usa 2010 Deductions for bad debts. Free tax usa 2010 Deductions from sales to customers, such as returns and allowances, and similar items. Free tax usa 2010 Deductions for legal and other expenses of contesting the repayment. Free tax usa 2010 Year of deduction (or credit). Free tax usa 2010   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Free tax usa 2010 If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Free tax usa 2010 For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Free tax usa 2010 Subscriptions. Free tax usa 2010   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Free tax usa 2010 Supplies and materials. Free tax usa 2010   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Free tax usa 2010   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Free tax usa 2010 You do not keep a record of when they are used. Free tax usa 2010 You do not take an inventory of the amount on hand at the beginning and end of the tax year. Free tax usa 2010 This method does not distort your income. Free tax usa 2010   You can also deduct the cost of books, professional instruments, equipment, etc. Free tax usa 2010 , if you normally use them within a year. Free tax usa 2010 However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Free tax usa 2010 For more information regarding depreciation see Publication 946, How To Depreciate Property. Free tax usa 2010 Utilities. Free tax usa 2010   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Free tax usa 2010 However, any part due to personal use is not deductible. Free tax usa 2010 Telephone. Free tax usa 2010   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Free tax usa 2010 However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Free tax usa 2010 Prev  Up  Next   Home   More Online Publications