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