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How To Fill Out A 1040ez

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How To Fill Out A 1040ez

How to fill out a 1040ez 1. How to fill out a 1040ez   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. How to fill out a 1040ez Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. How to fill out a 1040ez Special rule for members of the U. How to fill out a 1040ez S. How to fill out a 1040ez Armed Forces. How to fill out a 1040ez   If you are a member of the U. How to fill out a 1040ez S. How to fill out a 1040ez Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. How to fill out a 1040ez Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. How to fill out a 1040ez Also see the special income source rule for members of the U. How to fill out a 1040ez S. How to fill out a 1040ez Armed Forces in chapter 2, under Compensation for Labor or Personal Services . How to fill out a 1040ez Special rule for civilian spouse of active duty member of the U. How to fill out a 1040ez S. How to fill out a 1040ez Armed Forces. How to fill out a 1040ez   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. How to fill out a 1040ez S. How to fill out a 1040ez possession. How to fill out a 1040ez Before relocating, you and your spouse must have the same tax residence. How to fill out a 1040ez If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. How to fill out a 1040ez As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. How to fill out a 1040ez S. How to fill out a 1040ez possession return, may be affected. How to fill out a 1040ez For more information, consult with state, local, or U. How to fill out a 1040ez S. How to fill out a 1040ez possession tax authorities regarding your tax obligations under MSRRA. How to fill out a 1040ez Presence Test If you are a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. How to fill out a 1040ez You were present in the relevant possession for at least 183 days during the tax year. How to fill out a 1040ez You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. How to fill out a 1040ez During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. How to fill out a 1040ez You were present in the United States for no more than 90 days during the tax year. How to fill out a 1040ez You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. How to fill out a 1040ez Earned income is pay for personal services performed, such as wages, salaries, or professional fees. How to fill out a 1040ez You had no significant connection to the United States during the tax year. How to fill out a 1040ez Special rule for nonresident aliens. How to fill out a 1040ez   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. How to fill out a 1040ez Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. How to fill out a 1040ez In that discussion, substitute the name of the possession for “United States” and “U. How to fill out a 1040ez S. How to fill out a 1040ez ” wherever they appear. How to fill out a 1040ez Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. How to fill out a 1040ez Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. How to fill out a 1040ez Days of presence in a possession. How to fill out a 1040ez   You are considered to be present in the relevant possession on any of the following days. How to fill out a 1040ez Any day you are physically present in that possession at any time during the day. How to fill out a 1040ez Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). How to fill out a 1040ez Your parent. How to fill out a 1040ez Your spouse. How to fill out a 1040ez Your child, who is your son, daughter, stepson, or stepdaughter. How to fill out a 1040ez This includes an adopted child or child lawfully placed with you for legal adoption. How to fill out a 1040ez This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. How to fill out a 1040ez Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. How to fill out a 1040ez   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). How to fill out a 1040ez Days of presence in the United States. How to fill out a 1040ez   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. How to fill out a 1040ez However, do not count the following days as days of presence in the United States. How to fill out a 1040ez Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. How to fill out a 1040ez “Child” is defined under item 2c earlier. How to fill out a 1040ez “Qualifying medical treatment” is defined later. How to fill out a 1040ez Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. How to fill out a 1040ez Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. How to fill out a 1040ez Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). How to fill out a 1040ez Any day you are temporarily in the United States as a student (defined later). How to fill out a 1040ez Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). How to fill out a 1040ez Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. How to fill out a 1040ez The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. How to fill out a 1040ez With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. How to fill out a 1040ez You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. How to fill out a 1040ez You must keep the following documentation. How to fill out a 1040ez Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. How to fill out a 1040ez Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. How to fill out a 1040ez Charitable Sports Event A charitable sports event is one that meets all of the following conditions. How to fill out a 1040ez The main purpose is to benefit a qualified charitable organization. How to fill out a 1040ez The entire net proceeds go to charity. How to fill out a 1040ez Volunteers perform substantially all the work. How to fill out a 1040ez In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. How to fill out a 1040ez You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. How to fill out a 1040ez Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. How to fill out a 1040ez The 5 calendar months do not have to be consecutive. How to fill out a 1040ez Full-time student. How to fill out a 1040ez   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. How to fill out a 1040ez However, school attendance exclusively at night is not considered full-time attendance. How to fill out a 1040ez School. How to fill out a 1040ez   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. How to fill out a 1040ez It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. How to fill out a 1040ez Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. How to fill out a 1040ez This section looks at the factors that determine if a significant connection exists. How to fill out a 1040ez You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. How to fill out a 1040ez For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. How to fill out a 1040ez Permanent home. How to fill out a 1040ez   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. How to fill out a 1040ez The dwelling unit must be available at all times, continuously, not only for short stays. How to fill out a 1040ez Exception for rental property. How to fill out a 1040ez   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. How to fill out a 1040ez   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. How to fill out a 1040ez   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. How to fill out a 1040ez You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. How to fill out a 1040ez A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. How to fill out a 1040ez Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. How to fill out a 1040ez ), and lineal descendants (children, grandchildren, etc. How to fill out a 1040ez ). How to fill out a 1040ez Anyone under an arrangement that lets you use some other dwelling unit. How to fill out a 1040ez Anyone at less than a fair rental price. How to fill out a 1040ez   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. How to fill out a 1040ez Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. How to fill out a 1040ez   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. How to fill out a 1040ez Example—significant connection. How to fill out a 1040ez Ann Green, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, is a sales representative for a company based in Guam. How to fill out a 1040ez Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. How to fill out a 1040ez Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. How to fill out a 1040ez When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. How to fill out a 1040ez Ann's stays are always of short duration and she asks her brother's permission to stay with him. How to fill out a 1040ez Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. How to fill out a 1040ez Ann satisfies the presence test because she has no significant connection to the United States. How to fill out a 1040ez Example—presence test. How to fill out a 1040ez Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. How to fill out a 1040ez They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. How to fill out a 1040ez The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. How to fill out a 1040ez In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. How to fill out a 1040ez Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. How to fill out a 1040ez However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. How to fill out a 1040ez Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. How to fill out a 1040ez Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. How to fill out a 1040ez If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. How to fill out a 1040ez If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. How to fill out a 1040ez Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. How to fill out a 1040ez Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. How to fill out a 1040ez Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). How to fill out a 1040ez Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). How to fill out a 1040ez Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. How to fill out a 1040ez For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. How to fill out a 1040ez Example. How to fill out a 1040ez In 2013, Sean Silverman, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. How to fill out a 1040ez When not at sea, Sean lived with his spouse at a house they own in American Samoa. How to fill out a 1040ez The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. How to fill out a 1040ez For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. How to fill out a 1040ez Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. How to fill out a 1040ez See Special Rules in the Year of a Move , later in this chapter. How to fill out a 1040ez Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. How to fill out a 1040ez S. How to fill out a 1040ez possession. How to fill out a 1040ez You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. How to fill out a 1040ez In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. How to fill out a 1040ez The location of your permanent home. How to fill out a 1040ez The location of your family. How to fill out a 1040ez The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. How to fill out a 1040ez The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. How to fill out a 1040ez The location where you conduct your routine personal banking activities. How to fill out a 1040ez The location where you conduct business activities (other than those that go into determining your tax home). How to fill out a 1040ez The location of the jurisdiction in which you hold a driver's license. How to fill out a 1040ez The location of the jurisdiction in which you vote. How to fill out a 1040ez The location of charitable organizations to which you contribute. How to fill out a 1040ez The country of residence you designate on forms and documents. How to fill out a 1040ez The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. How to fill out a 1040ez Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. How to fill out a 1040ez Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. How to fill out a 1040ez Example—closer connection to the United States. How to fill out a 1040ez Marcos Reyes, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. How to fill out a 1040ez His spouse and two teenage children remained in California to allow the children to complete high school. How to fill out a 1040ez He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. How to fill out a 1040ez Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. How to fill out a 1040ez Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. How to fill out a 1040ez Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. How to fill out a 1040ez Marcos received mail in California, including bank and brokerage statements and credit card bills. How to fill out a 1040ez He conducted his personal banking activities in California. How to fill out a 1040ez He held a California driver's license and was also registered to vote there. How to fill out a 1040ez Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. How to fill out a 1040ez Closer connection to another possession. How to fill out a 1040ez   Generally, possessions are not treated as foreign countries. How to fill out a 1040ez Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. How to fill out a 1040ez Example—tax home and closer connection to possession. How to fill out a 1040ez Pearl Blackmon, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. How to fill out a 1040ez For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. How to fill out a 1040ez Most of Pearl's personal belongings, including her automobile, are located in the CNMI. How to fill out a 1040ez She is registered to vote in, and has a driver's license issued by, the CNMI. How to fill out a 1040ez She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. How to fill out a 1040ez Pearl satisfies the presence test with respect to both Guam and the CNMI. How to fill out a 1040ez She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. How to fill out a 1040ez Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. How to fill out a 1040ez Pearl is considered a bona fide resident of Guam, the location of her tax home. How to fill out a 1040ez Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. How to fill out a 1040ez See Special Rules in the Year of a Move , next. How to fill out a 1040ez Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. How to fill out a 1040ez Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. How to fill out a 1040ez You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. How to fill out a 1040ez In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. How to fill out a 1040ez You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. How to fill out a 1040ez Example. How to fill out a 1040ez Dwight Wood, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, files returns on a calendar year basis. How to fill out a 1040ez He lived in the United States from January 2007 through May 2013. How to fill out a 1040ez In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. How to fill out a 1040ez From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. How to fill out a 1040ez If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. How to fill out a 1040ez If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. How to fill out a 1040ez Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. How to fill out a 1040ez You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. How to fill out a 1040ez In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. How to fill out a 1040ez You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. How to fill out a 1040ez Example. How to fill out a 1040ez Jean Aspen, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, files returns on a calendar year basis. How to fill out a 1040ez From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. How to fill out a 1040ez Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. How to fill out a 1040ez Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. How to fill out a 1040ez If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. How to fill out a 1040ez If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. How to fill out a 1040ez Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. How to fill out a 1040ez Example. How to fill out a 1040ez Randy White, a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen, files returns on a calendar year basis. How to fill out a 1040ez For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. How to fill out a 1040ez From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. How to fill out a 1040ez On May 5, 2013, Randy moved and changed his tax home to Nevada. How to fill out a 1040ez Later that year he established a closer connection to the United States than to Puerto Rico. How to fill out a 1040ez Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. How to fill out a 1040ez However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. How to fill out a 1040ez Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. How to fill out a 1040ez S. How to fill out a 1040ez possession, you may need to file Form 8898. How to fill out a 1040ez This applies to the U. How to fill out a 1040ez S. How to fill out a 1040ez possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. How to fill out a 1040ez Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. How to fill out a 1040ez Your worldwide gross income (defined below) in that tax year is more than $75,000. How to fill out a 1040ez You meet one of the following. How to fill out a 1040ez You take a position for U. How to fill out a 1040ez S. How to fill out a 1040ez tax purposes that you became a bona fide resident of a U. How to fill out a 1040ez S. How to fill out a 1040ez possession after a tax year for which you filed a U. How to fill out a 1040ez S. How to fill out a 1040ez income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. How to fill out a 1040ez You are a citizen or resident alien of the United States who takes the position for U. How to fill out a 1040ez S. How to fill out a 1040ez tax purposes that you ceased to be a bona fide resident of a U. How to fill out a 1040ez S. How to fill out a 1040ez possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. How to fill out a 1040ez You take the position for U. How to fill out a 1040ez S. How to fill out a 1040ez tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. How to fill out a 1040ez Worldwide gross income. How to fill out a 1040ez   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. How to fill out a 1040ez Example. How to fill out a 1040ez You are a U. How to fill out a 1040ez S. How to fill out a 1040ez citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. How to fill out a 1040ez You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. How to fill out a 1040ez Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. How to fill out a 1040ez You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. How to fill out a 1040ez In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. How to fill out a 1040ez This is in addition to any criminal penalty that may be imposed. How to fill out a 1040ez Prev  Up  Next   Home   More Online Publications
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The How To Fill Out A 1040ez

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