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Irs Form Ez

Irs form ez 8. Irs form ez   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. Irs form ez Cash method. Irs form ez Car and Truck ExpensesOffice in the home. Irs form ez Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. Irs form ez InsuranceHow to figure the deduction. Irs form ez Interest Legal and Professional FeesTax preparation fees. Irs form ez Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. Irs form ez Taxi, commuter bus, and limousine. Irs form ez Baggage and shipping. Irs form ez Car or truck. Irs form ez Meals and lodging. Irs form ez Cleaning. Irs form ez Telephone. Irs form ez Tips. Irs form ez More information. Irs form ez Business Use of Your HomeExceptions to exclusive use. Irs form ez Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. Irs form ez These costs are known as business expenses. Irs form ez These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. Irs form ez To be deductible, a business expense must be both ordinary and necessary. Irs form ez An ordinary expense is one that is common and accepted in your field of business. Irs form ez A necessary expense is one that is helpful and appropriate for your business. Irs form ez An expense does not have to be indispensable to be considered necessary. Irs form ez For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. Irs form ez If you have an expense that is partly for business and partly personal, separate the personal part from the business part. Irs form ez The personal part is not deductible. Irs form ez Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. Irs form ez Bad Debts If someone owes you money you cannot collect, you have a bad debt. Irs form ez There are two kinds of bad debts, business bad debts and nonbusiness bad debts. Irs form ez A business bad debt is generally one that comes from operating your trade or business. Irs form ez You may be able to deduct business bad debts as an expense on your business tax return. Irs form ez Business bad debt. Irs form ez   A business bad debt is a loss from the worthlessness of a debt that was either of the following. Irs form ez Created or acquired in your business. Irs form ez Closely related to your business when it became partly or totally worthless. Irs form ez A debt is closely related to your business if your primary motive for incurring the debt is a business reason. Irs form ez   Business bad debts are mainly the result of credit sales to customers. Irs form ez They can also be the result of loans to suppliers, clients, employees, or distributors. Irs form ez Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. Irs form ez If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. Irs form ez    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. Irs form ez Accrual method. Irs form ez   If you use an accrual method of accounting, you normally report income as you earn it. Irs form ez You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. Irs form ez Cash method. Irs form ez   If you use the cash method of accounting, you normally report income when you receive payment. Irs form ez You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. Irs form ez More information. Irs form ez   For more information about business bad debts, see chapter 10 in Publication 535. Irs form ez Nonbusiness bad debts. Irs form ez   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). Irs form ez For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. Irs form ez Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. Irs form ez You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. Irs form ez You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. Irs form ez See Form 8936 and Form 8910 for more information. Irs form ez Local transportation expenses. Irs form ez   Local transportation expenses include the ordinary and necessary costs of all the following. Irs form ez Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Irs form ez Tax home is defined later. Irs form ez Visiting clients or customers. Irs form ez Going to a business meeting away from your regular workplace. Irs form ez Getting from your home to a temporary workplace when you have one or more regular places of work. Irs form ez These temporary workplaces can be either within the area of your tax home or outside that area. Irs form ez Local business transportation does not include expenses you have while traveling away from home overnight. Irs form ez Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. Irs form ez However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. Irs form ez   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Irs form ez It includes the entire city or general area in which your business or work is located. Irs form ez Example. Irs form ez You operate a printing business out of rented office space. Irs form ez You use your van to deliver completed jobs to your customers. Irs form ez You can deduct the cost of round-trip transportation between your customers and your print shop. Irs form ez    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. Irs form ez These costs are personal commuting expenses. Irs form ez Office in the home. Irs form ez   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. Irs form ez For more information, see Business Use of Your Home, later. Irs form ez Example. Irs form ez You are a graphics designer. Irs form ez You operate your business out of your home. Irs form ez Your home qualifies as your principal place of business. Irs form ez You occasionally have to drive to your clients to deliver your completed work. Irs form ez You can deduct the cost of the round-trip transportation between your home and your clients. Irs form ez Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. Irs form ez Standard mileage rate. Irs form ez Actual expenses. Irs form ez Standard mileage rate. Irs form ez   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. Irs form ez For 2013, the standard mileage rate is 56. Irs form ez 5 cents per mile. Irs form ez    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. Irs form ez Choosing the standard mileage rate. Irs form ez   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. Irs form ez In later years, you can choose to use either the standard mileage rate or actual expenses. Irs form ez   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). Irs form ez Standard mileage rate not allowed. Irs form ez   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Irs form ez Parking fees and tolls. Irs form ez   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Irs form ez (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Irs form ez ) Actual expenses. Irs form ez   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. Irs form ez    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. Irs form ez   Actual car expenses include the costs of the following items. Irs form ez 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. Irs form ez You can divide your expenses based on the miles driven for each purpose. Irs form ez Example. Irs form ez You are the sole proprietor of a flower shop. Irs form ez You drove your van 20,000 miles during the year. Irs form ez 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). Irs form ez You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Irs form ez More information. Irs form ez   For more information about the rules for claiming car and truck expenses, see Publication 463. Irs form ez Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. Irs form ez The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Irs form ez For details, see chapter 11 in Publication 535. Irs form ez That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Irs form ez Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Irs form ez You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. Irs form ez This method of deducting the cost of business property is called depreciation. Irs form ez The discussion here is brief. Irs form ez You will find more information about depreciation in Publication 946. Irs form ez What property can be depreciated?   You can depreciate property if it meets all the following requirements. Irs form ez It must be property you own. Irs form ez It must be used in business or held to produce income. Irs form ez You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. Irs form ez It must have a useful life that extends substantially beyond the year it is placed in service. Irs form ez It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Irs form ez You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. Irs form ez It must not be excepted property. Irs form ez This includes property placed in service and disposed of in the same year. Irs form ez Repairs. Irs form ez    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. Irs form ez You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. Irs form ez Depreciation method. Irs form ez   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). Irs form ez MACRS is discussed in detail in Publication 946. Irs form ez Section 179 deduction. Irs form ez   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Irs form ez This deduction is known as the “section 179 deduction. Irs form ez ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). Irs form ez See IRC 179(e). Irs form ez   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Irs form ez The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). Irs form ez Special rules apply to trucks and vans. Irs form ez For more information, see Publication 946. Irs form ez It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. Irs form ez    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. Irs form ez For more information, see the Instructions for Form 4562 or Publication 946. Irs form ez Listed property. Irs form ez   You must follow special rules and recordkeeping requirements when depreciating listed property. Irs form ez Listed property is any of the following. Irs form ez Most passenger automobiles. Irs form ez Most other property used for transportation. Irs form ez Any property of a type generally used for entertainment, recreation, or amusement. Irs form ez Certain computers and related peripheral equipment. Irs form ez   For more information about listed property, see Publication 946. Irs form ez Form 4562. Irs form ez   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. Irs form ez Depreciation on property placed in service during the current tax year. Irs form ez A section 179 deduction. Irs form ez Depreciation on any listed property (regardless of when it was placed in service). Irs form ez    If you have to use Form 4562, you must file Schedule C. Irs form ez You cannot use Schedule C-EZ. Irs form ez   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. Irs form ez The pay may be in cash, property, or services. Irs form ez To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. Irs form ez In addition, the pay must meet both the following tests. Irs form ez The pay must be reasonable. Irs form ez The pay must be for services performed. Irs form ez Chapter 2 in Publication 535 explains and defines these requirements. Irs form ez You cannot deduct your own salary or any personal withdrawals you make from your business. Irs form ez As a sole proprietor, you are not an employee of the business. Irs form ez If you had employees during the year, you must use Schedule C. Irs form ez You cannot use Schedule C-EZ. Irs form ez Kinds of pay. Irs form ez   Some of the ways you may provide pay to your employees are listed below. Irs form ez For an explanation of each of these items, see chapter 2 in Publication 535. Irs form ez Awards. Irs form ez Bonuses. Irs form ez Education expenses. Irs form ez Fringe benefits (discussed later). Irs form ez Loans or advances you do not expect the employee to repay if they are for personal services actually performed. Irs form ez Property you transfer to an employee as payment for services. Irs form ez Reimbursements for employee business expenses. Irs form ez Sick pay. Irs form ez Vacation pay. Irs form ez Fringe benefits. Irs form ez   A fringe benefit is a form of pay for the performance of services. Irs form ez The following are examples of fringe benefits. Irs form ez Benefits under qualified employee benefit programs. Irs form ez Meals and lodging. Irs form ez The use of a car. Irs form ez Flights on airplanes. Irs form ez Discounts on property or services. Irs form ez Memberships in country clubs or other social clubs. Irs form ez Tickets to entertainment or sporting events. Irs form ez   Employee benefit programs include the following. Irs form ez Accident and health plans. Irs form ez Adoption assistance. Irs form ez Cafeteria plans. Irs form ez Dependent care assistance. Irs form ez Educational assistance. Irs form ez Group-term life insurance coverage. Irs form ez Welfare benefit funds. Irs form ez   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. Irs form ez For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. Irs form ez If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. Irs form ez    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. Irs form ez For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Irs form ez Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. Irs form ez Fire, theft, flood, or similar insurance. Irs form ez Credit insurance that covers losses from business bad debts. Irs form ez Group hospitalization and medical insurance for employees, including long-term care insurance. Irs form ez Liability insurance. Irs form ez Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Irs form ez Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Irs form ez Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Irs form ez Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Irs form ez Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Irs form ez If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Irs form ez If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Irs form ez Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. Irs form ez Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Irs form ez Nondeductible premiums. Irs form ez   You cannot deduct premiums on the following kinds of insurance. Irs form ez Self-insurance reserve funds. Irs form ez You cannot deduct amounts credited to a reserve set up for self-insurance. Irs form ez This applies even if you cannot get business insurance coverage for certain business risks. Irs form ez However, your actual losses may be deductible. Irs form ez For more information, see Publication 547, Casualties, Disasters, and Thefts. Irs form ez Loss of earnings. Irs form ez You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. Irs form ez However, see item (8) in the previous list. Irs form ez Certain life insurance and annuities. Irs form ez For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Irs form ez You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Irs form ez A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Irs form ez For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Irs form ez The disallowance applies without regard to whom the policy covers. Irs form ez Insurance to secure a loan. Irs form ez If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Irs form ez Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Irs form ez In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. Irs form ez Self-employed health insurance deduction. Irs form ez   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. Irs form ez How to figure the deduction. Irs form ez   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Irs form ez However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. Irs form ez You have more than one source of income subject to self-employment tax. Irs form ez You file Form 2555 or Form 2555-EZ (relating to foreign earned income). Irs form ez You are using amounts paid for qualified long-term care insurance to figure the deduction. Irs form ez Prepayment. Irs form ez   You cannot deduct expenses in advance, even if you pay them in advance. Irs form ez This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Irs form ez Example. Irs form ez In 2013, you signed a 3-year insurance contract. Irs form ez Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Irs form ez You can deduct in 2014 and 2015 the premium allocable to those years. Irs form ez More information. Irs form ez   For more information about deducting insurance, see chapter 6 in Publication 535. Irs form ez Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. Irs form ez Interest relates to your business if you use the proceeds of the loan for a business expense. Irs form ez It does not matter what type of property secures the loan. Irs form ez You can deduct interest on a debt only if you meet all of the following requirements. Irs form ez You are legally liable for that debt. Irs form ez Both you and the lender intend that the debt be repaid. Irs form ez You and the lender have a true debtor-creditor relationship. Irs form ez You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. Irs form ez If a loan is part business and part personal, you must divide the interest between the personal part and the business part. Irs form ez Example. Irs form ez In 2013, you paid $600 interest on a car loan. Irs form ez During 2013, you used the car 60% for business and 40% for personal purposes. Irs form ez You are claiming actual expenses on the car. Irs form ez You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. Irs form ez The remaining interest of $240 is a nondeductible personal expense. Irs form ez More information. Irs form ez   For more information about deducting interest, see chapter 4 in Publication 535. Irs form ez That chapter explains the following items. Irs form ez Interest you can deduct. Irs form ez Interest you cannot deduct. Irs form ez How to allocate interest between personal and business use. Irs form ez When to deduct interest. Irs form ez The rules for a below-market interest rate loan. Irs form ez (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Irs form ez ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. Irs form ez However, you usually cannot deduct legal fees you pay to acquire business assets. Irs form ez Add them to the basis of the property. Irs form ez If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. Irs form ez The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. Irs form ez For more information, see Publication 529, Miscellaneous Deductions. Irs form ez Tax preparation fees. Irs form ez   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. Irs form ez You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. Irs form ez   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. Irs form ez Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. Irs form ez SEP (Simplified Employee Pension) plans. Irs form ez SIMPLE (Savings Incentive Match Plan for Employees) plans. Irs form ez Qualified plans (including Keogh or H. Irs form ez R. Irs form ez 10 plans). Irs form ez SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. Irs form ez You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. Irs form ez If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. Irs form ez You can also deduct trustees' fees if contributions to the plan do not cover them. Irs form ez Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Irs form ez You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. Irs form ez Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. Irs form ez These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. Irs form ez For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Irs form ez Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. Irs form ez Rent Expense Rent is any amount you pay for the use of property you do not own. Irs form ez In general, you can deduct rent as a business expense only if the rent is for property you use in your business. Irs form ez If you have or will receive equity in or title to the property, you cannot deduct the rent. Irs form ez Unreasonable rent. Irs form ez   You cannot take a rental deduction for unreasonable rents. Irs form ez Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Irs form ez Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Irs form ez Rent is not unreasonable just because it is figured as a percentage of gross receipts. Irs form ez   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Irs form ez For a list of the other related persons, see section 267 of the Internal Revenue Code. Irs form ez Rent on your home. Irs form ez   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Irs form ez You must meet the requirements for business use of your home. Irs form ez For more information, see Business Use of Your Home , later. Irs form ez Rent paid in advance. Irs form ez   Generally, rent paid in your business is deductible in the year paid or accrued. Irs form ez If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Irs form ez You can deduct the rest of your payment only over the period to which it applies. Irs form ez More information. Irs form ez   For more information about rent, see chapter 3 in Publication 535. Irs form ez Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. Irs form ez Income taxes. Irs form ez   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. Irs form ez You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. Irs form ez Do not deduct federal income tax. Irs form ez Employment taxes. Irs form ez   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. Irs form ez Employment taxes are discussed briefly in chapter 1. Irs form ez You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. Irs form ez Deduct these payments as taxes. Irs form ez Self-employment tax. Irs form ez   You can deduct one-half of your self-employment tax on line 27 of Form 1040. Irs form ez Self-employment tax is discussed in chapters 1 and 10. Irs form ez Personal property tax. Irs form ez   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. Irs form ez   You can also deduct registration fees for the right to use property within a state or local area. Irs form ez Example. Irs form ez May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. Irs form ez They had to pay $25 for their annual state license tags and $20 for their city registration sticker. Irs form ez They also paid $235 in city personal property tax on the car, for a total of $280. Irs form ez They are claiming their actual car expenses. Irs form ez Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. Irs form ez Real estate taxes. Irs form ez   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. Irs form ez Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Irs form ez The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Irs form ez   For more information about real estate taxes, see chapter 5 in Publication 535. Irs form ez That chapter explains special rules for deducting the following items. Irs form ez Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. Irs form ez Real estate taxes when you buy or sell property during the year. Irs form ez Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. Irs form ez Sales tax. Irs form ez   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Irs form ez If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Irs form ez If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Irs form ez If the property is depreciable, add the sales tax to the basis for depreciation. Irs form ez For information on the basis of property, see Publication 551, Basis of Assets. Irs form ez    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Irs form ez Do not include these taxes in gross receipts or sales. Irs form ez Excise taxes. Irs form ez   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. Irs form ez Excise taxes are discussed briefly in chapter 1. Irs form ez Fuel taxes. Irs form ez   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. Irs form ez Do not deduct these taxes as a separate item. Irs form ez   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Irs form ez For more information, see Publication 510, Excise Taxes. Irs form ez Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. Irs form ez Table 8-1. Irs form ez When Are Entertainment Expenses Deductible? (Note. Irs form ez The following is a summary of the rules for deducting entertainment expenses. Irs form ez For more details about these rules, see Publication 463. Irs form ez ) General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Irs form ez Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Irs form ez An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Irs form ez A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. Irs form ez Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Irs form ez   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. Irs form ez Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Irs form ez You cannot deduct expenses that are lavish or extravagant under the circumstances. Irs form ez You generally can deduct only 50% of your unreimbursed entertainment expenses. Irs form ez Travel expenses. Irs form ez   These are the ordinary and necessary expenses of traveling away from home for your business. Irs form ez You are traveling away from home if both the following conditions are met. Irs form ez Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work. Irs form ez You need to get sleep or rest to meet the demands of your work while away from home. Irs form ez Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Irs form ez It includes the entire city or general area in which your business is located. Irs form ez See Publication 463 for more information. Irs form ez   The following is a brief discussion of the expenses you can deduct. Irs form ez Transportation. Irs form ez   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. Irs form ez Taxi, commuter bus, and limousine. Irs form ez   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. Irs form ez Baggage and shipping. Irs form ez   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. Irs form ez Car or truck. Irs form ez   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. Irs form ez You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. Irs form ez If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Irs form ez Meals and lodging. Irs form ez   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Irs form ez In most cases, you can deduct only 50% of your meal expenses. Irs form ez Cleaning. Irs form ez   You can deduct the costs of dry cleaning and laundry while on your business trip. Irs form ez Telephone. Irs form ez   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. Irs form ez Tips. Irs form ez   You can deduct the tips you pay for any expense in this list. Irs form ez More information. Irs form ez   For more information about travel expenses, see Publication 463. Irs form ez Entertainment expenses. Irs form ez   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. Irs form ez In most cases, you can deduct only 50% of these expenses. Irs form ez   The following are examples of entertainment expenses. Irs form ez Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. Irs form ez Providing meals, a hotel suite, or a car to business customers or their families. Irs form ez To be deductible, the expenses must meet the rules listed in Table 8-1. Irs form ez For details about these rules, see Publication 463. Irs form ez Reimbursing your employees for expenses. Irs form ez   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. Irs form ez The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Irs form ez For details, see chapter 11 in Publication 535. Irs form ez That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Irs form ez Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. Irs form ez Even then, your deduction may be limited. Irs form ez To qualify to claim expenses for business use of your home, you must meet the following tests. Irs form ez Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your 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 business, or A separate structure (not attached to your home) you use in connection with your business. Irs form ez Exclusive use. Irs form ez   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Irs form ez The area used for business can be a room or other separately identifiable space. Irs form ez The space does not need to be marked off by a permanent partition. Irs form ez   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. Irs form ez Example. Irs form ez You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Irs form ez Your family also uses the den for recreation. Irs form ez The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. Irs form ez Exceptions to exclusive use. Irs form ez   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. Irs form ez For the storage of inventory or product samples. Irs form ez As a daycare facility. Irs form ez For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Irs form ez Regular use. Irs form ez   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. Irs form ez You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. Irs form ez Principal place of business. Irs form ez   You can have more than one business location, including your home, for a single trade or business. Irs form ez To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. Irs form ez To determine your principal place of business, you must consider all the facts and circumstances. Irs form ez   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Irs form ez You use it exclusively and regularly for administrative or management activities of your business. Irs form ez You have no other fixed location where you conduct substantial administrative or management activities of your business. Irs form ez   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. Irs form ez The relative importance of the activities performed at each location. Irs form ez If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. Irs form ez   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Irs form ez However, for other ways to qualify to deduct home office expenses, see Publication 587. Irs form ez Deduction limit. Irs form ez   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Irs form ez If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Irs form ez   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. Irs form ez The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Irs form ez The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Irs form ez Do not include in (2) above your deduction for one-half of your self-employment tax. Irs form ez   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Irs form ez New simplified method. Irs form ez    The IRS now provides a simplified method to determine your expenses for business use of your home. Irs form ez The simplified method is an alternative to calculating and substantiating actual expenses. Irs form ez In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. Irs form ez The area you use to figure your deduction is limited to 300 square feet. Irs form ez For more information, see the Instructions for Schedule C. Irs form ez More information. Irs form ez   For more information on deducting expenses for the business use of your home, see Publication 587. Irs form ez Other Expenses You Can Deduct You may also be able to deduct the following expenses. Irs form ez See Publication 535 to find out whether you can deduct them. Irs form ez Advertising. Irs form ez Bank fees. Irs form ez Donations to business organizations. Irs form ez Education expenses. Irs form ez Energy efficient commercial buildings deduction expenses. Irs form ez Impairment-related expenses. Irs form ez Interview expense allowances. Irs form ez Licenses and regulatory fees. Irs form ez Moving machinery. Irs form ez Outplacement services. Irs form ez Penalties and fines you pay for late performance or nonperformance of a contract. Irs form ez Repairs that keep your property in a normal efficient operating condition. Irs form ez Repayments of income. Irs form ez Subscriptions to trade or professional publications. Irs form ez Supplies and materials. Irs form ez Utilities. Irs form ez Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. Irs form ez For more information, see Publication 535. Irs form ez Bribes and kickbacks. Irs form ez Charitable contributions. Irs form ez Demolition expenses or losses. Irs form ez Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. Irs form ez Lobbying expenses. Irs form ez Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. Irs form ez Personal, living, and family expenses. Irs form ez Political contributions. Irs form ez Repairs that add to the value of your property or significantly increase its life. Irs form ez Prev  Up  Next   Home   More Online Publications
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Irs form ez Publication 524 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Irs form ez Tax questions. Irs form ez Useful Items - You may want to see: Reminders Future developments. Irs form ez  For the latest information about developments related to Publication 524, such as legislation enacted after it was published, go to www. Irs form ez irs. Irs form ez gov/pub524. Irs form ez Photographs of missing children. Irs form ez  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs form ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs form ez You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs form ez Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled. Irs form ez This publication explains: Who qualifies for the credit for the elderly or the disabled, and How to figure the credit. Irs form ez You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. Irs form ez Comments and suggestions. Irs form ez   We welcome your comments about this publication and your suggestions for future editions. Irs form ez   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Irs form ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs form ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs form ez   You can send your comments from www. Irs form ez irs. Irs form ez gov/formspubs/. Irs form ez Click on “More Information” and then on “Comment on Tax Forms and Publications”. Irs form ez   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Irs form ez Ordering forms and publications. Irs form ez   Visit www. Irs form ez irs. Irs form ez gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Irs form ez Internal Revenue Service 1201 N. Irs form ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Irs form ez   If you have a tax question, check the information available on IRS. Irs form ez gov or call 1-800-829-1040. Irs form ez We cannot answer tax questions sent to either of the above addresses. Irs form ez Useful Items - You may want to see: Publication 554 Tax Guide for Seniors Form (and instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled See How To Get Tax Help , near the end of this publication, for information about getting this publication and form. Irs form ez Prev  Up  Next   Home   More Online Publications